Ascent Solar Technologies, Inc. Common Stock 10Q 2020 Q3 Quarterly report

Ascent Solar Technologies, Inc. Common Stock (ASTI) 10-Q2020 Q3 Quarterly report

Content analysis

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)




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

For the quarterly period ended September 30, 2020



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

For the Transition Period from to

Commission File No. 001-32919

Ascent Solar Technologies, Inc.

(Exact name of registrant as specified in its charter)



Delaware		20-3672603
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

12300 Grant Street, Thornton, CO		80241
(Address of principal executive offices)		(Zip Code)

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

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

Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common	ASTI	OTC

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

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

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

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

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

As of April 9, 2021, there were 18,345,583,473 shares of our common stock issued and outstanding.

ASCENT SOLAR TECHNOLOGIES, INC.

Quarterly Report on Form 10-Q

Quarterly Period Ended September 30, 2020

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets - as of September 30, 2020 (unaudited) and December 31, 2019	1
	Condensed Consolidated Statements of Operations - For the Three and Nine Months Ended September 30, 2020 (unaudited) and September 30, 2019	2
	Condensed Consolidated Statements of Changes in Stockholder's Deficit - for the Three and Nine Months Ended September 30, 2020 (unaudited) and September 30, 2019	3
	Condensed Consolidated Statements of Cash Flow - For the Three and Nine Months Ended September 30, 2020 (unaudited) and September 30, 2019	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II. OTHER INFORMATION		38
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
SIGNATURES		41

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FORWARD-LOOKING STATEMENTS

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

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

•

Our limited operating history and lack of profitability;

•

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

•

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

•

Our ability to develop sales, marketing and distribution capabilities;

•

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

•

The accuracy of our estimates and projections;

•

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

•

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

•

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

•

Changes in our business plan or corporate strategies;

•

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

•

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

•

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

•

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

•

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

•

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

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

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

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ASCENT SOLAR TECHNOLOGIES, INC.

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

	September 30,			December 31,
	2020			2019
ASSETS
Current Assets:
Cash and cash equivalents	$	1,078,656		$	-
Trade receivables, net of allowance of $45,883 and $46,023, respectively		5,749			-
Inventories, net		510,049			533,892
Prepaid and other current assets		82,818			51,598
Total current assets		1,677,272			585,490
Property, Plant and Equipment:		26,475,610			32,911,969
Accumulated depreciation		(26,454,118	)		(28,677,350	)
		21,492			4,234,619
Other Assets:
Operating lease assets, net		5,790,779			-
Patents, net of accumulated amortization of $484,855 and $421,181, respectively		778,589			813,397
Other non-current assets		250,000			-
		6,819,368			813,397
Total Assets	$	8,518,132		$	5,633,506
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Accounts payable	$	861,496		$	1,663,316
Related party payables		460,173			460,173
Accrued expenses		1,403,187			1,624,564
Accrued Interest		1,530,303			2,107,401
Notes Payable		250,000			1,506,530
Current portion of long-term debt		-			6,075,307
Current portion of operating lease liability		476,490			-
Secured promissory notes, net of discount of $453,518 and $837,242, respectively		8,106,482			6,335,655
Promissory notes, net of discount of $0 and $16,666, respectively		1,337,637			1,092,771
Convertible notes, net of discount of $0 and $861,567, respectively		3,195,583			2,129,016
Embedded Derivative Liability		982,957			7,717,150
Total current liabilities		18,604,308			30,711,883
Long-Term Liabilities:
Noncurrent operating lease liabilities		5,326,870			-
Accrued warranty liability		20,750			28,404
Total liabilities		23,951,928			30,740,287
Stockholders’ Deficit:
Series A preferred stock, $.0001 par value; 750,000 shares authorized; 48,100 and 48,100 shares issued and outstanding, respectively ($728,181 and $703,863 Liquidation Preference, respectively)		5			5
Common stock, $0.0001 par value, 20,000,000,000 authorized; 5,230,490,450 and 4,759,161,650 shares issued and outstanding, respectively		523,049			475,917
Additional paid in capital		399,817,526			397,817,526
Accumulated Deficit		(415,774,376	)		(423,400,229	)
Total stockholders’ deficit		(15,433,796	)		(25,106,781	)
Total Liabilities and Stockholders’ Deficit	$	8,518,132		$	5,633,506

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

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ASCENT SOLAR TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020			2019			2020			2019
Revenues
Products	$	6,293		$	338,373		$	60,445		$	628,124
Total Revenues		6,293			338,373			60,445			628,124
Costs and Expenses
Costs of revenue		5,528			74,271			101,156			282,825
Research, development and manufacturing operations		150,060			460,775			485,592			1,078,842
Selling, general and administrative		315,660			633,566			505,053			1,545,852
Depreciation and amortization		26,325			58,154			137,978			185,163
Total Costs and Expenses		497,573			1,226,766			1,229,779			3,092,682
Loss from Operations		(491,280	)		(888,393	)		(1,169,334	)		(2,464,558	)
Other Income/(Expense)
Other income/(expense), net		3,055,366			6,000			3,314,966			842,500
Interest expense		(963,648	)		(1,907,895	)		(3,227,112	)		(6,740,340	)
Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net		990,183			1,510,883			8,707,333			6,430,048
Total Other Income/(Expense)		3,081,901			(391,012	)		8,795,187			532,208
Net Income/(Loss)	$	2,590,621		$	(1,279,405	)	$	7,625,853		$	(1,932,350	)
Net Income/(Loss) Per Share (Basic)	$	0.0005		$	(0.001	)	$	0.0015		$	(0.003	)
Net Income/(Loss) Per Share (Diluted)	$	0.0001		$	(0.001	)	$	0.0001		$	(0.003	)
Weighted Average Common Shares Outstanding (Basic)		5,230,490,450			1,457,404,260			5,053,300,857			705,196,069
Weighted Average Common Shares Outstanding (Diluted)		66,848,261,292			1,457,404,260			65,693,072,463			705,196,069

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

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ASCENT SOLAR TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(unaudited)

For the Three Months Ended September 30, 2020

	Series A Preferred Stock				Series 1A Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Total Stockholders’ Equity
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			(Deficit)
Balance at June 30, 2020		48,100		5		-		-		5,230,490,450		523,049		397,817,526		(418,364,997	)		(20,024,417	)
Proceeds from issuance of Series 1A Preferred Stock		-		-		2,000		-		-		-		2,000,000		-			2,000,000
Net Income																2,590,621			2,590,621
Balance at September 30, 2020		48,100		5		2,000		-		5,230,490,450		523,049		399,817,526		(415,774,376	)		(15,433,796	)

For the Three Months Ended September 30, 2019

	Series A Preferred Stock				Series 1A Preferred Stock				Common Stock				Additional Paid-In			Accumulated			Total Stockholders’ Equity
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Deficit			(Deficit)
Balance, June 30, 2019		48,100	$	5		-	$	-		696,089,337	$	69,609	$	397,258,622		$	(419,184,913	)	$	(21,856,677	)
Interest and Dividend Expense paid with Common Stock		-		-		-		-		89,313,372		8,932		7,393			-			16,325
Conversion of St.George Note into Common Shares		-		-		-		-		457,222,223		45,722		43,278			-			89,000
Conversion of BayBridge Note into Common Shares		-		-		-		-		605,769,231		60,577		25,423			-			86,000
Conversion of Bellridge Note into Common Shares		-		-		-		-		474,484,128		47,448		41,552			-			89,000
Conversion of PowerUp Note into Common Shares		-		-		-		-		155,824,176		15,582		(982	)		-			14,600
Conversion of GS Capital Note into Common Shares		-		-		-		-		311,168,154		31,117		26,601			-			57,718
Stock issued for fees		-		-		-		-		66,669,229		6,667		1,098			-			7,765
Loss on Extinguishment of Liabilities		-		-		-		-		-		-		271,186			-			271,186
Net Loss																	(1,279,405	)		(1,279,405	)
Balance at September 30, 2019		48,100	$	5		-	$	-		2,856,539,850	$	285,654	$	397,674,171		$	(420,464,318	)	$	(22,504,488	)

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

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ASCENT SOLAR TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(unaudited)

For the Nine Months Ended September 30, 2020

	Series A Preferred Stock				Series 1A Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Total Stockholders’ Equity
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			(Deficit)
Balance, December 31, 2019		48,100	$	5		-	$	-		4,759,161,650	$	475,917	$	397,817,526	$	(423,400,229	)	$	(25,106,781	)
Interest and Dividend Expense paid with Common Stock		-		-		-		-		21,328,800		2,132		-		-			2,132
Proceeds from issuance of Series 1A Preferred Stock		-		-		2,000		-		-		-		2,000,000		-			2,000,000
Conversion of Bellridge Note into Common Shares		-		-		-		-		450,000,000		45,000		-		-			45,000
Net Income																7,625,853			7,625,853
Balance at September 30, 2020		48,100		5		2,000		-		5,230,490,450		523,049		399,817,526		(415,774,376	)		(15,433,796	)

For the Nine Months Ended September 30, 2019

	Series A Preferred Stock						Series 1A Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount		Shares		Amount		Capital		Deficit			(Deficit)
Balance, December 31, 2018		60,756		$	6			-	$	-		63,537,885	$	6,354	$	395,889,712	$	(418,531,968	)	$	(22,635,896	)
Interest and Dividend Expense paid with Common Stock		-		��	-			-		-		118,531,773		11,853		98,489		-			110,342
Conversion of St.George Note into Common Shares		-			-			-		-		602,361,830		60,236		194,834		-			255,070
Conversion of Global Ichiban Note into Common Shares		-			-			-		-		9,595,327		960		114,040		-			115,000
Conversion of BayBridge Note into Common Shares		-			-			-		-		790,692,046		79,069		185,931		-			265,000
Conversion of Bellridge Note into Common Shares		-			-			-		-		573,601,030		57,360		144,640		-			202,000
Conversion of PowerUp Note into Common Shares		-			-			-		-		291,431,537		29,143		210,457		-			239,600
Conversion of GS Capital Note into Common Shares		-			-			-		-		327,651,670		32,765		39,953		-			72,718
Stock issued for fees												79,136,751		7,914		7,911		-			15,825
Conversion of Series A Preferred Stock into Common Shares		(12,656	)		(1	)		-		-		1		-		1		-			-
Loss on Extinguishment of Liabilities		-			-			-		-		-		-		767,453		-			767,453
Stock based compensation		-			-			-		-		-		-		20,750		-			20,750
Net Loss																		(1,932,350	)		(1,932,350	)
Balance at September 30, 2019		48,100			5			-		-		2,856,539,850		285,654		397,674,171		(420,464,318	)		(22,504,488	)

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ASCENT SOLAR TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the Nine Months Ended
	September 30,
	2020			2019
Operating Activities:
Net income/(loss)	$	7,625,853		$	(1,932,350	)
Adjustments to reconcile net income/(loss) to cash used in operating activities:
Depreciation and amortization		137,978			185,163
Operating lease asset amortization		28,710			—
Stock based compensation		-			20,750
Realized (gain) on sale and foreclosure of assets		(3,314,966	)		(842,500	)
Amortization of deferred financing costs		2,692			24,639
Non-cash interest expense		807,368			2,023,031
Amortization of debt discount		1,331,417			3,675,795
Bad debt expense		(141	)		(302	)
Warranty reserve		(7,654	)		(4,253	)
Change in fair value of derivatives and (gain) on extinguishment of liabilities, net		(8,707,333	)		(6,430,048	)
Changes in operating assets and liabilities:
Accounts receivable		(5,608	)		143,059
Inventories		23,843			(23,599	)
Prepaid expenses and other current assets		(283,912	)		1,766
Accounts payable		(388,113	)		(494,883	)
Related party payable		—			189,260
Operating lease liabilities		(16,129	)		—
Accrued interest		1,008,568			(51,880	)
Accrued expenses		283,439			951,184
Net cash used in operating activities		(1,473,988	)		(2,565,168	)
Investing Activities:
Purchase of property, plant and equipment		—			(6,393	)
Proceeds on sale of Assets		254,600			842,500
Patent activity costs		(156	)		(9,361	)
Net cash provided by investing activities		254,444			826,746
Financing Activities:
Proceeds from debt issuance		443,200			1,762,268
Repayment of debt		(145,000	)		(10,000	)
Proceeds from issuance of stock		2,000,000			—
Payment of debt financing costs		—			(7,500	)
Net cash provided by (used in) financing activities		2,298,200			1,744,768
Net change in cash and cash equivalents		1,078,656			6,346
Cash and cash equivalents at beginning of period		-			18,159
Cash and cash equivalents at end of period	$	1,078,656		$	24,505
Supplemental Cash Flow Information:
Cash paid for interest	$	—		$	28,484
Non-Cash Transactions:
Non-cash conversions of preferred stock and convertible notes to equity	$	47,132		$	1,259,741
Non-cash financing costs	$	—		$	10,800
Operating lease assets obtained in exchange for operating lease liabilities	$	(5,819,489	)	$	—
Non-cash mortgage derecognition	$	(6,443,897	)	$	—
Non-cash property foreclosure	$	6,443,897		$	—
Interest converted to principal	$	—		$	171,152
Common shares issued for fees	$	—		$	15,825
Initial embedded derivative liabilities	$	—		$	3,781,186
Promissory notes exchanged for convertible notes	$	—		$	850,000

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

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION

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

NOTE 2. BASIS OF PRESENTATION

The accompanying, unaudited, condensed consolidated financial statements have been derived from the accounting records of Ascent Solar Technologies, Inc., Ascent Solar (Asia) Pte. Ltd., and Ascent Solar (Shenzhen) Co., Ltd. (collectively, "the Company") as of September 30, 2020 and December 31, 2019, and the results of operations for the three and nine months ended September 30, 2020 and 2019. Ascent Solar (Shenzhen) Co., Ltd. is wholly owned by Ascent Solar (Asia) Pte. Ltd., which is wholly owned by Ascent Solar Technologies, Inc. All significant inter-company balances and transactions have been eliminated in the accompanying consolidated financial statements.

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

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies were described in Note 3 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. There have been no significant changes to our accounting policies as of September 30, 2020.

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

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

Paycheck Protection Program Loan: The Company has elected to account for the forgivable loan received under the Paycheck Protection Program (“PPP”) provisions of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act as a debt instrument and to accrue interest on the outstanding loan balance. Additional interest at a market rate (due to the stated interest rate of the PPP loan being below market) is not imputed, as the transactions where interest rates prescribed by governmental agencies are excluded from the scope of accounting guidance on imputing interest. The proceeds from the loan will remain recorded as a liability until either (1) the loan is, in part of wholly, forgiven and the Company has been legally released or (2) the Company repays the loan to the lender.

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Refer to Note 15 for further discussion.

Recently Adopted or to be Adopted Accounting Policies

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

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

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

Other new pronouncements issued but not effective as of September 30, 2020 are not expected to have a material impact on the Company’s consolidated financial statements.

NOTE 4. LIQUIDITY, CONTINUED OPERATIONS, AND GOING CONCERN

During the nine months ended September 30, 2020 and the year ended December 31, 2019, the Company entered into multiple financing agreements to fund operations. Further discussion of these transactions can be found in Notes 9 through 11, and Note 16 of the financial statements presented as of, and for, the nine months ended September 30, 2020, and in Notes 8, 9, 10, 11, 12, and 14 of the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

The Company has continued limited PV production at its manufacturing facility. The Company does not expect that sales revenue and cash flows will be sufficient to support operations and cash requirements until it has fully implemented its product strategy. During the nine months ended September 30, 2020 the Company used $1,473,988 in cash for operations.

Additional projected product revenues are not anticipated to result in a positive cash flow position for the next twelve months overall and, as of September 30, 2020, the Company has negative working capital. As such, cash liquidity sufficient for the next twelve months will require additional financing.

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

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

NOTE 5. PROPERTY, PLANT AND EQUIPMENT

The following table summarizes property, plant and equipment as of September 30, 2020 and December 31, 2019:

	As of September 30,			As of December 31,
	2020			2019
Building	$	-		$	5,828,960
Furniture, fixtures, computer hardware and computer software		489,421			489,421
Manufacturing machinery and equipment		25,986,189			26,593,588
Depreciable property, plant and equipment		26,475,610			32,911,969
Less: Accumulated depreciation and amortization		(26,454,118	)		(28,677,350	)
Net property, plant and equipment	$	21,492		$	4,234,619

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

During the nine months ended September 30, 2020, the Company disposed of certain redundant machinery and equipment. This machinery and equipment was fully depreciated and the Company realized a gain of $254,600 from these sales.

Depreciation expense for the three months ended September 30, 2020 and 2019 was $15,316 and $45,585, respectively. Depreciation expense for the nine months ended September 30, 2020 and 2019 was $103,014 and $140,083. Depreciation expense is recorded under “Depreciation and amortization expense” in the unaudited Condensed Consolidated Statements of Operations.

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

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

At September 30, 2020, the Company recorded an operating lease asset and liability totaling $5,790,779 and $5,803,360, respectively. During the quarter ended September 30, 2020, the Company recorded operating lease costs included in rent expense totaling $28,710.

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Future maturities of the operating lease liability are as follows:

Remainder of 2020	$	150,000
2021		960,000
2022		988,800
2023		1,018,464
2024		1,049,018
Thereafter		3,339,682
Total lease payments	$	7,505,964
Less amounts representing interest		(1,702,604	)
Present value of lease liability	$	5,803,360

The remaining lease term and discount rate of the operating lease is 87.5 months and 7.0% respectively.

NOTE 6. INVENTORIES

Inventories, net of reserves, consisted of the following at September 30, 2020 and December 31, 2019:

	As of September 30,		As of December 31,
	2020		2019
Raw materials	$	510,049	$	503,832
Work in process		-		30,060
Finished goods		-		0
Total	$	510,049	$	533,892

NOTE 7. NOTES PAYABLE

On February 24, 2017, the Company entered into an agreement with a vendor (“Vendor 1”) to convert the balance of their account into 3 notes payable in the aggregate amount of $765,784. The notes bear interest of 6% per annum and matured on February 24, 2018; all outstanding principal and accrued interest is due and payable upon maturity. On June 5, 2018, the Company entered into another agreement with the same Vendor 1 to convert the balance of their account into a fourth note payable with a principal amount of $308,041, this note also bears interest at a rate of 6% per annum, and matured on July 31, 2018. On September 11, 2020, the Company entered into a settlement agreement (the “Settlement Agreement A”) with Vendor 1. Pursuant to Settlement Agreement A, the Company paid $120,000 on September 23, 2020 as the full and final settlement of all amounts owed between the parties. Following such payment, a satisfaction of an existing judgment in favor of such law firm was filed in Adams County Colorado. The Company booked a gain of approximately $954,000 relating to Settlement Agreement A.

On June 30, 2017, the Company entered into an agreement with another vendor (“Vendor 2”) to convert the balance of their account into a note payable in the amount of $250,000. The note bears interest of 5% per annum and matured on February 28, 2018. As of September 30, 2020, the Company had not made any payments on this note, the accrued interest was $40,685, and the note is due upon demand.

On September 30, 2017, the Company entered into a settlement agreement with a customer to convert the credit balance of their account into a note payable in the amount of $215,234. The note bears interest of 5% per annum and matured on December 31, 2019. On September 11, 2020, the Company entered into a settlement agreement (the “Settlement Agreement B”) with the customer. Pursuant to Settlement Agreement B, the Company paid $20,000 on September 18, 2020 as the full and final settlement of all amounts owed between the parties. The Company booked a gain of approximately $158,000 relating to Settlement Agreement B.

NOTE 8. DEBT

On August 2, 2019, CHFA entered into an agreement to assign the mortgage note to Iliad Research and Trading, L.P., a Utah limited liability partnership ("IRT"). This agreement closed on September 11, 2019, and IRT paid a total of $5,885,148

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to CHFA to assume the note. The payment amount consisted of $5,405,666 of principal and $479,482 of interest and fees. Interest will accrue on the note at the default interest rate of 10.5%.

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

NOTE 9. SECURED PROMISSORY NOTES

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

	Global Ichiban			St. George			BD 1		Total
Secured Notes Principal Balance at December 31, 2018	$	4,956,745		$	1,315,000		$	0	$	6,271,745
New notes		0			845,000			0		845,000
Note conversions		(115,000	)		0			0		(115,000	)
Interest converted to principal		171,152			0			0		171,152
Note assignments		0			0			0		0
Secured Notes Principal Balance at December 31, 2019		5,012,897			2,160,000			0		7,172,897
Less: remaining discount		(765,576	)		(71,666	)		0		(837,242	)
Secured Notes, net of discount, at December 31, 2019		4,247,321			2,088,334			0		6,335,655
New notes		6,400,000			0			0		6,400,000
Notes exchanged		(5,012,897	)		(2,160,000	)		2,160,000		(5,012,897	)
Secured Notes Principal Balance at September 30, 2020		6,400,000			0			2,160,000		8,560,000
Less: remaining discount		(453,518	)		0			0		(453,518	)
Secured Notes, net of discount, at September 30, 2020	$	5,946,482		$	0		$	2,160,000	$	8,106,482

Global Ichiban Secured Promissory Notes

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

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

The following table summarizes the conversion activity of this note:

Conversion Period	Principal Converted		Interest Converted		Common Shares Issued
Q1 2018	$	1,250,000	$	-		2,450,981
Q2 2018		176,000		-		1,035,295
Q1 2019		115,000		-		9,595,327
	$	1,541,000	$	-		13,081,603

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

Period	Interest converted to Principal
Q1 2018	$	96,281
Q2 2018		44,237
Q1 2019		171,152
	$	311,670

All the notes issued in accordance with the note purchase and exchange agreement dated November 30, 2017 are secured by a security interest on substantially all of the Company’s assets, bear interest at a rate of 12% per annum and contain standard and customary events of default.

On September 9, 2020, the Company entered into a securities exchange agreement (“GI Exchange Agreement”) with Global. Pursuant to the terms of the GI Exchange Agreement, Global agreed to surrender and exchange all of its existing outstanding promissory notes with an aggregate principal balance of $6,313,387 (including accrued interest). In exchange, the Company issued to Global a secured convertible promissory note with a principal amount of $6,400,000.00 (“GI Exchange Note”). The GI Exchange Note will mature on September 30, 2022. Principal on the GI Exchange Note, if not converted, will be payable in a lump sum on September 30, 2022. The GI Exchange Note will not bear any accrued interest but bears a default interest rate of 18% in the event of a default under the GI Exchange Note. The GI Exchange Note is secured by a lien on substantially all of the Company’s assets pursuant to the Security Agreement dated November 30, 2017 (the “Security Agreement”) entered into between the Company and Global. The Company has accounted for the GI Exchange Agreement as a troubled debt restructuring. The future undiscounted cashflow of the new secured convertible promissory note totaling $6,400,000 is more than the carrying value of the original outstanding promissory notes totaling $6,313,387, therefore no gain was recorded and a new effective interest rate has been established based on the carrying value of the original promissory notes and revised cashflow. The difference of $86,613 was recorded as an original issue debt discount and will be charged to interest over the term of the note.

Subsequent to the period of this report, the amounts owed to Global were fully settled. Refer to the Global Ichiban Settlement Agreement section of Note 16. Subsequent Events for further details.

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

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

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During the first quarter of 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivative associated with these notes. Engaging the services of a firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. As a result of the fair value assessments, the Company recorded an aggregate net gain of 2.0 million during the first quarter of 2020, recorded as a “Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net” in the Condensed Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated. As the derivative associated with these notes was already eliminated, there was 0 gain or loss upon the September 9, 2020 exchange transaction.

The conversion option in the GI Exchange Note was deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the company ascertained the value of the conversion option as if separate from the convertible issuance based on the following assumptions: annual volatility of 49%, and a dividend yield of 0%, and appropriately recorded that value as a derivative liability. At September 9, 2020, the derivative liability associated with the GI Exchange Note was $447,903. The fair value of the derivative was recorded as a debt discount and will be charged to interest of the life of the note.

The derivative liability associated with the note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. Management assessed the fair value of this embedded derivative, as of September 30, 2020, using the following assumptions: annual volatility of 39%, and a dividend yield of 0%. As a result of the fair value assessments, the Company recorded a net loss of $535,054 for the three and nine months ended September 30, 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of $982,957 as of September 30, 2020.

St. George Secured Convertible Notes

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

On November 5, 2018, the Company entered into a second securities purchase agreement with St. George, for the private placement of a $1.2 million secured convertible promissory note ("Company Note"). On November 7, 2018, the Company received $200,000 of gross proceeds from the offering of the Company Note. The Company may receive additional cash proceeds of up to an aggregate of $800,000 through cash payments made from time to time by St George of principal and interest under the eight Investor Notes. The aggregate principal amount of the Company Note is divided into nine tranches, which tranches correspond to (i) the cash funding received on November 5, 2018 and (ii) the principal amounts of the eight Investor Notes. As of December 2019, the Company had received an additional $800,000 in proceeds and had recorded $1,220,000 in principal related to the Company and Investor Notes. The Company recorded original issue discounts of $200,000 and debt financing costs of $20,000, which will be recognized as interest expense, ratably, over the life of the note. As of September 30, 2020, the closing dates, closing amounts, and proceeds on completed Note tranches are as follows:

Closing Date	Closing Amount		Proceeds
11/7/2018	$	260,000	$	200,000
11/19/2018	$	120,000	$	100,000
11/30/2018	$	120,000	$	100,000
12/7/2018	$	120,000	$	100,000
12/17/2018	$	120,000	$	100,000
1/3/2019	$	120,000	$	100,000
1/17/2019	$	120,000	$	100,000
1/30/2019	$	120,000	$	100,000
2/8/2019	$	120,000	$	100,000

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On March 13, 2019, the Company entered into a third securities purchase agreement with St. George, for the private placement of a $365,000 secured convertible promissory note ("Third Note"). The Company recorded original issue discounts of $60,000 and debt financing costs of $5,000, which will be recognized as interest expense, ratably, over the life of the note. As of September 30, 2020, the closing dates, closing amounts, and proceeds on completed Note tranches are as follows:

Closing Date	Closing Amount		Proceeds
3/15/2019	$	125,000	$	100,000
3/22/2019	$	120,000	$	100,000
4/4/2019	$	120,000	$	100,000

As of September 30, 2020, no principal or interest had been paid or converted, and the aggregate principal and interest balance of the Notes were $2,160,000, and $417,151, respectively.

On September 9, 2020, all debts with St. George were assigned to another investor, BD 1 Investment Holding, LLC (“BD 1”). The Company subsequently entered into an Exchange Agreement with BD 1 on December 18, 2020. Refer to the BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.

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

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At September 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of a firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $2.5 million for the nine months ended September 30, 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of September 30, 2020.

NOTE 10. PROMISSORY NOTES

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

	Investor 1				Investor 2			BD 1		SBA		Total
Promissory Notes Principal Balance at December 31, 2018	$	494,437			$	850,000		$	-	$	0	$	1,344,437
New principal		0				615,000			-		0		615,000
Notes exchanged		0				(850,000	)		-		0		(850,000	)
Promissory Notes Principal Balance at December 31, 2019		494,437				615,000			-		0		1,109,437
Less: remaining discount		0				(16,666	)		-		0		(16,666	)
Promissory Notes, net of discount, at December 31, 2019		494,437				598,334			-		0		1,092,771
New principal		0				35,000			—		193,200		228,200
Notes assigned or exchanged		(494,437	)			(650,000	)		1,144,437		0		0
Promissory Notes Principal Balance at September 30, 2020		0		��		-			1,144,437		193,200		1,337,637
Less: remaining discount		0				—			—		0		0
Promissory Notes, net of discount, at September 30, 2020	$	0			$	-		$	1,144,437	$	193,200	$	1,337,637

Offering of Unsecured, Non-Convertible Notes to Investor 1

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

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

As of September 30, 2020, $331,000 of principal and $51,000 of interest had been paid on this note. The outstanding principal and accrued interest balances on the note as of September 30, 2020 were $494,437 and $175,376, respectively.

On September 11, the debt with Investor 1 was assigned to BD 1. The Company subsequently entered into an Exchange Agreement with BD 1 on December 18, 2020. Refer to the BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.

Offering of Unsecured, Non-Convertible Notes to Investor 2

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

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

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

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

On March 11, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $60,000. The promissory note was issued with an original issue discount of $10,000, which was recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $50,000, which was received in several tranches between January 2019 and March 2019. This note bears interest at 12% per annum and matured on September 11, 2019. All principal and interest is payable upon maturity. As of September 30, 2020, the remaining principal and interest on this note were $60,000 and $10,000, respectively.

On May 14, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $100,000. The promissory note was issued with an original issue discount of $25,000, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $75,000, which was received in several tranches between March 2019 and May 2019. This note bears interest at 12% per annum and matured on October 11, 2019. All principal and interest is payable upon maturity. As of September 30, 2020, the remaining principal and interest on this note were $100,000 and $14,000, respectively.

On July 8, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $125,000. The promissory note was issued with an original issue discount of $25,000, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $100,000. This note bears interest at 12% per annum and matured on January 8, 2020. All principal and interest is payable upon maturity. As of September 30, 2020, the remaining principal and interest on this note were $125,000 and $15,000, respectively.

On August 8, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $65,000. The promissory note was issued with an original issue discount of $20,000, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $45,000. This note bears interest at 12% per annum and matured on February 8, 2020. All principal and interest is payable upon maturity. As of September 30, 2020, the remaining principal and interest on this note were $65,000 and $7,000, respectively.

On September 9, 2019, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $150,000. The promissory note was issued with an original issue discount of $40,000, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $110,000, which was received in several tranches during September 2019. This note bears interest at 12% per annum and matured on March 9, 2020. All principal and interest is payable upon maturity. As of September 30, 2020, the remaining principal and interest on this note were $150,000 and $15,000, respectively.

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On May 1, 2020, the Company initiated a non-convertible, unsecured promissory note with Investor 2 for an aggregate principal amount of $150,000. The promissory note was issued with an original issue discount of $35,000, which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $115,000, which was received in several tranches between September 2019 and November 2019. This note bears interest at 12% per annum and matures on May 1, 2021. All principal and interest is payable upon maturity. As of September 30, 2020, the remaining principal and interest on this note were $150,000 and $11,000, respectively.

As of September 30, 2020, the aggregate outstanding principal and interest for Investor 2 was $650,000 and $72,000, respectively.

On September 11, 2020, the debt with Investor 2 was assigned to BD 1. The Company subsequently entered into an Exchange Agreement with BD 1 on December 18, 2020. Refer to the BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.

SBA PPP

On April 17, 2020, the Company obtained a PPP Loan from Vectra Bank Colorado (“Vectra”) in the aggregate amount of $193,200, which was established under the CARES Act, as administered by the Small Business Association (“SBA”). Under the terms of the CARES Act and the PPP, all or a portion of the principal amount of the PPP Loan is subject to forgiveness so long as, over the 24-week period following the Company’s receipt of the proceeds of the PPP Loan, the Company uses those proceeds for payroll costs, rent, utility costs or the maintenance of employee and compensation levels. The PPP Loan is unsecured, guaranteed by the SBA, and has a two-year term, maturing on April 17, 2022. Interest accrues on the loan beginning with the initial disbursement; however, payments of principal and interest are deferred until Vectra’s determination of the amount of forgiveness applied for by the Company is approved by the SBA. If the Company does not apply for forgiveness within 10 months after the last day of the covered period (defined, at the Company’s election as 24 weeks), such payments will be due that month. See Note 15 for further information on the SBA PPP note.

NOTE 11. CONVERTIBLE NOTES

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

	Principal Balance 12/31/2018		New Notes			Notes assigned or exchanged			Notes converted			Principal Balance 12/31/2019		Less: Discount Balance			Net Principal Balance 12/31/2019
October 2016 Notes	$	330,000	$	0		$	0		$	0		$	330,000	$	0		$	330,000
St. George Notes		1,099,233		(172,500	)		0			(309,070	)		617,663		0			617,663
BayBridge Notes		62,500		0			1,160,000			(281,900	)		940,600		(408,333	)		532,267
Bellridge Notes		455,000		510,000			(226,000	)		(243,000	)		496,000		(382,500	)		113,500
Power Up Notes		225,000		149,500			0			(267,680	)		106,820		(26,566	)		80,254
EMA Note		75,000		0			(75,000	)		0			0		0			0
Widjaja Note		0		330,000			0			0			330,000		(1	)		329,999
GS Capital Notes		0		178,568			75,000			(84,068	)		169,500		(44,167	)		125,333
	$	2,246,733	$	995,568		$	934,000		$	(1,185,718	)	$	2,990,583	$	(861,567	)	$	2,129,016

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	Principal Balance 12/31/2019		New Notes/Adjustments		Notes assigned or exchanged			Notes converted			Principal Balance 9/30/2020		Less: Discount Balance		Net Principal Balance 9/30/2020
October 2016 Notes	$	330,000	$	0	$	(330,000	)	$	0		$	0	$	0	$	0
St. George Notes		617,663		0		(617,663	)		0			0		0		0
BayBridge Notes		940,600		0		(940,600	)		0			0		0		0
Bellridge Notes		496,000		0		(451,000	)		(45,000	)		0		0		0
Power Up Notes		106,820		0		(106,820	)		-			-		0		-
Widjaja Note		330,000		0		(330,000	)		0			0		0		0
GS Capital Notes		169,500		0		(169,500	)		0			0		0		0
Penumbra Note		0		250,000		0			0			250,000		0		250,000
BD 1 Notes		-		2,945,583		0			-			2,945,583		0		2,945,583
	$	2,990,583	$	3,195,583	$	(2,945,583	)	$	(45,000	)	$	3,195,583	$	0	$	3,195,583

October 2016 Convertible Notes

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

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

Outstanding principal and accrued interest on the convertible notes were $330,000 and $75,000, respectively as of September 30, 2020.

On September 11, 2020, the October 2016 Convertible Notes were assigned to BD 1. The Company subsequently entered into an Exchange Agreement with BD 1 on December 18, 2020. Refer to the BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.

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

At September 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of a firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $558,000 for the nine months ended September 30, 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of September 30, 2020.

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St. George Convertible Note

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

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

As of September 30, 2020, cash payments of $192,000 had been made on the convertible note, and $916,000 had been converted into 1.2 billion shares of the Company's common stock. The remaining balance on the note was $618,000 as of September 30, 2020.The following table summarizes the conversion activity of this note:

Conversion Period	Principal Converted		Interest Converted		Common Shares Issued
Q1 2018	$	75,000	$	-		187,500
Q2 2018		316,600		-		2,082,778
Q3 2018		102,500		-		3,142,333
Q4 2018		112,500		-		10,437,046
Q1 2019		106,750		-		58,503,244
Q2 2019		59,320		-		86,636,364
Q3 2019		89,000		-		457,222,222
Q4 2019		54,000		-		540,000,000
	$	915,670	$	-		1,158,211,487

On September 9, 2020, the debt with St. George was assigned to BD 1. The Company subsequently entered into an Exchange Agreement with BD 1. Refer to the BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.

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

At September 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of a firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $553,000 for the nine months ended September 30, 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of September 30, 2020.

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BayBridge Convertible Note

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

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

As of September 30, 2020, aggregate principal of $489,400 and interest of $12,710 had been converted into 1 billion shares of common stock and no cash payments of principal or interest had been made on these exchange notes. The principal and accrued interest balances on the exchange notes, as of September 30, 2020, were $940,600 and $119,300, respectively.

The following table summarizes the conversion activity of these notes:

Conversion Period	Principal Converted		Interest Converted		Common Shares Issued
Q4 2018	$	207,500	$	4,303		16,008,198
Q1 2019		90,500		3,278		47,400,806
Q2 2019		88,500		2,079		141,822,223
Q3 2019		86,000		2,261		616,247,346
Q4 2019		16,900		789		176,886,700
	$	489,400	$	12,710		998,365,273

On September 11, 2020, the debt with Baybridge was assigned to BD 1. The Company subsequently entered into an Exchange Agreement with BD 1 on December 18, 2020. Refer to the BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.

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

At September 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of a firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $932,000 for the nine months ended September 30, 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of September 30, 2020.

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Bellridge Convertible Notes

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

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

As of September 30, 2020, an aggregate principal of $533,000 and interest of $32,000, on the Bellridge convertible notes had been converted into 1.6 billion shares of common stock and 0 cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of September 30, 2020 were $451,000 and $84,000, respectively.

The following table summarizes the conversion activity of these notes:

Conversion Period	Principal Converted		Interest Converted		Common Shares Issued
Q3 2018	$	137,500	$	2,104		3,716,105
Q4 2018		107,500		4,000		7,554,399
Q1 2019		65,615		4,507		38,696,339
Q2 2019		47,385		3,874		68,142,087
Q3 2019		89,000		9,779		529,061,862
Q4 2019		41,000		5,404		464,037,300
Q2 2020		45,000		2,133		471,328,800
	$	533,000	$	31,801		1,582,536,892

On September 11, 2020, all outstanding debt with Bellridge was assigned to BD 1. The Company subsequently entered into an Exchange Agreement with BD 1 on December 18, 2020. Refer to BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.

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

At September 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of afirm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $744,000 for the nine months ended September 30, 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of September 30, 2020.

PowerUp Convertible Notes

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

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

As of September 30, 2020, three of the notes had been converted in full. The aggregate principal and interest converted was $267,680 and $9,000, respectively, into 578.8 million shares of common stock. NaN cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of September 30, 2020 were $107,000 and $14,000, respectively.

The following table summarizes the conversion activity of these notes:

Conversion Period	Principal Converted		Interest Converted		Common Shares Issued
Q1 2019	$	182,500	$	7,300		95,014,902
Q2 2019		42,500		1,700		47,155,556
Q3 2019		14,600		-		155,824,176
Q4 2019		28,080		-		280,800,000
	$	267,680	$	9,000		578,794,634

On September 11, 2020, the debt with Power Up was assigned to BD 1. The Company subsequently entered into an Exchange Agreement with BD 1 on December 18, 2020. Refer to the BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.

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

At September 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of a firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $117,000 for the nine months ended September 30, 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of September 30, 2020.

Widjaja Convertible Note

On January 11, 2019, the Company entered into a note purchase with Jason Widjaja (“Widjaja”), for the private placement of a $330,000 convertible promissory note, in exchange for $330,000 of gross proceeds. The note is unsecured, bears interest at 12% per annum, matured on January 11, 2020, and contains standard and customary events of default. Principal and interest on the note will be payable upon maturity.

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

As of September 30, 2020, 0 principal and 0 interest had been converted into shares of common stock and 0 cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of September 30, 2020 were $330,000 and $58,000, respectively.

On September 11, 2020, the debt with Widjaja was assigned to BD 1. The Company subsequently entered into an Exchange Agreement with BD 1 on December 18, 2020. Refer to the BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.

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

At September 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of a firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $167,000 for the nine months ended September 30, 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of September 30, 2020.

GS Capital Convertible Note

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

These notes are unsecured, bear interest at 8% per annum, mature twelve months from the date of issuance, and contain standard and customary events of default. Principal and interest on the note will be payable upon maturity. There are no registration rights applicable to the note.

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

As of September 30, 2020, principal of $84,000 and interest of $6,000 had been converted into 473.4 million shares of common stock and 0 cash payments of principal or interest had been made. The aggregate principal and accrued interest balances as of September 30, 2020 were $169,500 and $19,011, respectively.

The following table summarizes the conversion activity of these notes:

Conversion Period	Principal Converted		Interest Converted		Common Shares Issued
Q2 2019	$	15,000	$	763		17,321,692
Q3 2019		57,718		4,284		335,425,736
Q4 2019		11,350		719		120,697,800
	$	84,068	$	5,766		473,445,228

On September 11, 2020, the debt with GS was assigned to BD 1. The Company subsequently entered into an Exchange Agreement with BD 1 on December 18, 2020. Refer to the BD 1 Exchange Agreement section of Note 16. Subsequent Events for further discussion.

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

At September 30, 2020, pursuant to ASC Topic 815, Derivatives and Hedging, Management conducted a fair value assessment of the embedded derivatives associated with these notes. Engaging the services of a firm specializing in these valuations, it was determined that a rational investor would not convert the notes, and would not expect to do so in the foreseeable future. The Company has reported doubt as to its ability to continue as a going concern since 2015. The Company scaled down operations and did not expect to ramp up until significant financing could be obtained and has been operating under these conditions for some time already, continuously chasing funding to continue operations. Circumstances shifted in late 2019 and early 2020, making fundraising and continuing operations more difficult, thereby reducing liquidity and attractiveness of the common stock. These new circumstances made it clear to current and prospective investors that the Company would either file bankruptcy or restructure with a strategic investor. Accordingly, as of the valuation date, conversion of a debt instrument into common stock that cannot be sold in the marketplace would put the holder in a far less secure position compared to holding the instrument as debt. As a result of the fair value assessments, the Company recorded an aggregate net gain of $182,000 for the nine months ended September 30, 2020, as "Change in fair value of derivatives and gain/loss on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations to properly reflect that the value of the embedded derivative had been eliminated as of September 30, 2020.

Penumbra Convertible Note

On June 9, 2020, the Company issued to Penumbra Solar Technologies, Inc. (“Penumbra”) a $250,000 aggregate principal amount convertible promissory note. The Company has received $250,000 of gross proceeds from the offering of the note. The aggregate principal amount (together with accrued interest) will mature on June 9, 2021. The note bears interest at a rate of 6% per annum. The interest rate increases to 18% in the event of a default. The note is convertible, at the holder’s option, into shares of the Company’s Common Stock at a conversion price equal to $0.0001 per share.

Subsequent to the date of this report, this debt with Penumbra was assigned to Crowdex Investment, LLC (“Crowdex”).

NOTE 12. SERIES A PREFERRED STOCK

In June 2013, the Company entered into a Securities Purchase Agreement with an investor to sell an aggregate of $750,000 shares of Series A Preferred Stock at a price of $8.00 per share, resulting in gross proceeds of $6.0 million. This purchase agreement included warrants to purchase up to 13,125 shares of common stock of the Company. The transfer of cash and securities took place incrementally, the first closing occurring on June 17, 2013 with the transfer of 125,000 shares of Series A Preferred Stock and a warrant to purchase 2,187 shares of common stock for $1.0 million. The final closings took place in August 2013, with the transfer of 625,000 shares of Series A Preferred Stock and a warrant to purchase 10,938 shares of common stock for $5.0 million.

Holders of Series A Preferred Stock are entitled to cumulative dividends at a rate of 8% per annum when and if declared by the Board of Directors in its sole discretion. The dividends may be paid in cash or in the form of common stock (valued at 10% below market price, but not to exceed the lowest closing price during the applicable measurement period), at the discretion of the Board of Directors. The dividend rate on the Series A Preferred Stock is indexed to the Company's stock price and subject to adjustment. In addition, the Series A Preferred Stock contains a make-whole provision whereby, conversion or redemption of the preferred stock within 4 years of issuance will require dividends for the full four year period to be paid by the Company in cash or common stock (valued at 10% below market price, but not to exceed the lowest closing price during the applicable measurement period). This make-whole provision expired in June 2017.

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The Series A Preferred Stock may be converted into shares of common stock at the option of the Company if the closing price of the common stock exceeds $232, as adjusted, for twenty consecutive trading days, or by the holder at any time. The Company has the right to redeem the Series A Preferred Stock at a price of $8.00 per share, plus any accrued and unpaid dividends, plus the make-whole amount (if applicable). At September 30, 2020, the preferred shares were not eligible for conversion to common shares at the option of the Company. The holder of the preferred shares may convert to common shares at any time, at no cost, at a ratio of 1 preferred share into 1 common share (subject to standard ratable anti-dilution adjustments). Upon any conversion (whether at the option of the Company or the holder), the holder is entitled to receive any accrued but unpaid dividends.

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

Except as otherwise required by law (or with respect to approval of certain actions), the Series A Preferred Stock shall have no voting rights. Upon any liquidation, dissolution or winding up of the Company, after payment or provision for payment of debts and other liabilities of the Company, the holders of Series A Preferred Stock shall be entitled to receive, pari passu with any distribution to the holders of common stock of the Company, an amount equal to $8.00 per share of Series A Preferred Stock plus any accrued and unpaid dividends.

As of September 30, 2020, there were 48,100 shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of $355,673.

Series 1A Preferred Stock – Tranche 1 Closing

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

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

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

NOTE 13. STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock

At September 30, 2020, the Company had 20 billion shares of common stock, $0.0001 par value, authorized for issuance. Each share of common stock has the right to 1 vote. As of September 30, 2020, the Company had 5,230,490,450 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through September 30, 2020.

Preferred Stock

At September 30, 2020, the Company had 25,000,000 shares of preferred stock, $0.0001 par value, authorized for issuance. Preferred stock may be issued in classes or series. Designations, powers, preferences, rights, qualifications, limitations and restrictions are determined by the Company’s Board of Directors.

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

Preferred Stock Series Designation	Shares Authorized		Shares Outstanding
Series A		750,000		48,100
Series 1A		5,000		2,000
Series B-1		2,000		0
Series B-2		1,000		0
Series C		1,000		0
Series D		3,000		0
Series D-1		2,500		0
Series E		2,800		0
Series F		7,000		0
Series G		2,000		0
Series H		2,500		0
Series I		1,000		0
Series J		1,350		0
Series J-1		1,000		0
Series K		20,000		0

Series A Preferred Stock

Refer to Note 12 for Series A Preferred Stock activity.

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

There were no transactions involving the Series B-1, B-2, C, D, D-1, H, I, J, J-1, or K during the three and nine months ended September 30, 2020 and 2019.

NOTE 14. EQUITY PLANS AND SHARE-BASED COMPENSATION

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

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

	For the Nine Months Ended September 30,
		2020		2019
Research and development	$	—	$	—
Selling, general and administrative		—		20,750
Total share-based compensation cost	$	—	$	20,750

Stock Options: There was 0 expense recorded for the nine months ended September 30, 2020 related to stock option awards. The Company recognized share-based compensation expense for stock options of $20,750 to officers, directors and employees for the nine months ended September 30, 2019 related to stock option awards, reduced for forfeitures. There were 0 option grants during the nine months ended September 30, 2020 or 2019.

As of September 30, 2020, there were 0 unvested stock options. As of September 30, 2020, 97 shares were vested and 120 shares remained available for future grants under the Option Plan.

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

	Stock Option Shares			Weighted Average Remaining Contractual Life in Years
Outstanding at December 31, 2018		110		5.18
Granted		0
Exercised		0
Canceled		(13	)
Outstanding at December 31, 2019		97		4.68
Granted		0
Exercised		0
Canceled		—
Outstanding and Exercisable at September 30, 2020		97		3.92

Restricted Stock: The Company did 0t recognize share-based compensation expense related to restricted stock grants for the nine months ended September 30, 2020 or for the year ended December 31, 2019. There were 0 restricted stock grants for the periods ended September 30, 2020 and December 31, 2019.

As of September 30, 2020, there was 0 unrecognized share-based compensation expense from unvested restricted stock, 0 shares were expected to vest in the future, and 496 shares remained available for future grants under the Restricted Stock Plan.

NOTE 15. PAYCHECK PROTECTION PROGRAM LOAN

On April 17, 2020, the Company obtained a PPP Loan from Vectra Bank Colorado (“Vectra”) in the aggregate amount of $193,200, which was established under the CARES Act, as administered by the Small Business Administration (“SBA”). Under the terms of the CARES Act and the PPP, all or a portion of the principal amount of the PPP Loan is subject to forgiveness so long as, over the 24-week period following the Company’s receipt of the proceeds of the PPP Loan, the company uses those proceeds for payroll costs, rent, utility costs or the maintenance of employee and compensation levels. The PPP Loan is unsecured, guaranteed by the SBA, and has a two year term, maturing on April 17, 2022. Interest accrues on the loan beginning with the initial disbursement; however, payments of principal and interest are deferred until Vectra’s determination of the amount of forgiveness applied for by the Company is approved by the SBA. If the Company does not apply for forgiveness within 10 months after the last day of the covered period (defined, at the Company’s election as 24 weeks), such payments will be due that month.

The terms of the PPP loan provide for customary events of default including, among other things, payment defaults, breach of representations and warranties, and insolvency events.

The Company plans to apply for forgiveness of the PPP Loan in the second quarter of 2021.

The PPP Loan is subject to any new guidance and new requirements released by the Department of the Treasury.

At September 30, 2020 the total outstanding balance of the PPP Loan was $193,200.

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NOTE 16. SUBSEQUENT EVENTS

The Company was in a dormant status for most of 2020 due to financial constraints as well as delays in reorganization and fund-raising efforts due to the impact of COVID-19. Below is the sequence of events subsequent to September 30, 2020:

Crowdex Note

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

BD 1 Exchange Agreement

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

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

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

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Series 1A Preferred Stock – Tranche 2 Closing

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

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

Common Stock Purchase Agreement

On March 4, 2021, the Company entered into a common stock purchase agreement (“Common Stock SPA” with Baybridge Capital Fund, LP, a private investor (“BBCF”) for the placement of 75,000,000 shares of the Company’s Common Stock (the “Shares”) at a fixed price of $0.04 per share. On March 9, 2021, the Company sold the Shares to BBCF in exchange for $3,000,000 of gross proceeds.

Global Ichiban Settlement Agreement

On March 9, 2021, the Company entered into a settlement agreement (“Settlement”) with our current secured promissory note holder, Global Ichiban Limited (“Global”). Pursuant to the Settlement, the Company issued 168,000,000 shares of Common Stock of the Company (“Settlement Shares”) to Global in exchange for the cancellation of the outstanding secured promissory note of $5,800,000 (the “Secured Note”). The Secured Note, which was originally scheduled to mature on September 30, 2022, had a variable-rate conversion feature that entitled Global to convert into shares of Common Stock of the Company at 80% of the 5-day average closing bid-price prior to any conversion. The Secured Note also had a lien on substantially all of the Company’s assets including intellectual properties. Following the Settlement, the lien shall be removed and all of the Company’s assets shall be unencumbered going forward. Refer to the 8-K filing on March 10, 2021 for more details of the Settlement.

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

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

Overview

We are a company formed to commercialize flexible PV modules using our proprietary technology. For the three and nine months ended September 30, 2020, we generated $6,293 and $60,445 of revenue from product sales, respectively. As of September 30, 2020, we had an accumulated deficit of $415,774,376.

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

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

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

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

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

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

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Commercialization and Manufacturing Strategy

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

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

Significant Trends, Uncertainties and Challenges

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

•

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

•

Successful ramping up of commercial production on the equipment installed;

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

Our ability to achieve projected operational performance and cost metrics;

•

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

•

Availability of raw materials.

Basis of Presentation: The accompanying condensed consolidated financial statements (unaudited) have been derived from the accounting records of Ascent Solar Technologies, Inc., Ascent Solar (Asia) Pte. Ltd., and Ascent Solar (Shenzhen) Co., Ltd. (collectively, "the Company") as of September 30, 2020 and December 31, 2019, and the results of operations for the three and nine months ended September 30, 2020 and 2019. Ascent Solar (Shenzhen) Co., Ltd. is wholly owned by Ascent Solar (Asia) Pte. Ltd., which is wholly owned by Ascent Solar Technologies, Inc. All significant inter-company balances and transactions have been eliminated in the accompanying consolidated financial statements.

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Critical Accounting Policies and Estimates

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

Results of Operations

Comparison of the Three Months Ended September 30, 2020 and 2019

Revenues. Our revenues were $6,293 for the three months ended September 30, 2020 compared to $338,373 for the three months ended September 30, 2019, a decrease of $332,080, due primarily to reduced operations in the current period.

Cost of revenues. Our Cost of revenues for the three months ended September 30, 2020 was $5,528 compared to $74,271 for the three months ended September 30, 2019, a decrease of $68,743. The decrease in cost of revenues is mainly due to the decrease in materials and labor costs as a result of a decrease in production for the three months ended September 30, 2020 compared to 2019. Cost of revenues for the three months ended September 30, 2020 is comprised primarily of direct labor and overhead. Management believes our factory is currently significantly under-utilized, and a substantial increase in revenue would result in marginal increases to Direct Labor and Overhead included in the Cost of revenues. As such management’s focus going forward is to improve gross margin through increased sales and improved utilization of our factory. We are currently pursuing high-value PV markets.

Research, development and manufacturing operations. Research, development and manufacturing operations costs were $150,060 for the three months ended September 30, 2020, compared to $460,775 for the three months ended September 30, 2019, a decrease of $310,715. The decrease in cost is due primarily to reduced operations in the current period. Research, development and manufacturing operations costs include costs incurred for product development, pre-production and production activities in our manufacturing facility. Research, development and manufacturing operations costs also include costs related to technology development and governmental contracts.

Selling, general and administrative. Selling, general and administrative expenses were $315,660 for the three months ended September 30, 2020, compared to $663,566 for the three months ended September 30, 2019, a decrease of $317,906. The decrease in costs is due primarily to reduced operations in the current period.

Other Income/Expense, net. Other income was $3,081,901 for the three months ended September 30, 2020, compared to other expense of $391,012 for the three months ended September 30, 2019, an improvement of $3,472,913. The improvement is due primarily to the gain on the sale of our facility and settlement of liabilities.

Net Income/Loss. Our Net Income was $2,590,621 for the three months ended September 30, 2020, compared to a Net Loss of $1,279,405 for the three months ended September 30, 2019, an improvement of $3,870,026. The improvement is due primarily to the gain on the sale of our facility and settlement of liabilities.

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The improvement of $3,870,026 in Net Income/Loss for the three months ended September 30, 2020 can be summarized in variances in significant account activity as follows:

	Decrease (Increase) to Net Loss For the Three Months Ended September 30, 2020 Compared to the Three Months Ended September, 2019
Revenues	$	(332,080	)
Cost of Revenue		68,743
Research, development and manufacturing operations		310,715
Selling, general and administrative expenses		317,906
Depreciation and Amortization Expense		31,829
Other Income / Expense
Other income/(expense), net		3,049,366
Interest Expense		944,247
Non-Cash Change in Fair Value of Derivatives and Gain/Loss on Extinguishment of Liabilities, net		(520,700	)
Increase to Net Income	$	3,870,026

Comparison of the Nine Months Ended September 30, 2020 and 2019

Revenues. Our revenues were $60,445 for the nine months ended September 30, 2020 compared to $628,124 for the nine months ended September 30, 2019, a decrease of $567,679, due primarily to reduced operations in the current period.

Cost of revenues. Our Cost of revenues for the nine months ended September 30, 2020 was $101,156 compared to $282,825 for the nine months ended September 30, 2019, a decrease of $181,669. The decrease in cost of revenues is mainly due to the decrease in materials and labor costs as a result of a decrease in production for the nine months ended September 30, 2020 compared to 2019. Cost of revenues for the nine months ended September 30, 2020 is comprised primarily of direct labor and overhead. Management believes our factory is currently significantly under-utilized, and a substantial increase in revenue would result in marginal increases to Direct Labor and Overhead included in the Cost of revenues. As such management’s focus going forward is to improve gross margin through increased sales and improved utilization of our factory. We are currently pursuing high-value PV markets.

Research, development and manufacturing operations. Research, development and manufacturing operations costs were $485,592 for the nine months ended September 30, 2020, compared to $1,078,842 for the nine months ended September 30, 2019, a decrease of $593,250. The decrease in costs is due primarily to reduced operations in the current period. Research, development and manufacturing operations costs include costs incurred for product development, pre-production and production activities in our manufacturing facility. Research, development and manufacturing operations costs also include costs related to technology development and governmental contracts.

Selling, general and administrative. Selling, general and administrative expenses were $505,052 for the nine months ended September 30, 2020, compared to $1,545,852 for the nine months ended September 30, 2019, a decrease of $1,040,800. The decrease in costs is due primarily to reduced operations in the current period.

Other Income/Expense, net. Other income was $8,795,187 for the nine months ended September 30, 2020, compared to other income of $532,208 for the nine months ended September 30, 2019, an increase of $8,262,979. The increase is due primarily to the change in fair value of derivative liabilities and the gain on sale of our facility and settlement of liabilities.

Net Income. Our Net Income was $7,625,853 for the nine months ended September 30, 2020, compared to a Net Loss of $1,932,350 for the nine months ended September 30, 2019, an improvement of $9,558,203. The improvement is due primarily to the change in fair value of the derivative liabilities and the gain on sale of our facility and settlement of liabilities.

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The improvement of $9,558,204 for the nine months ended September 30, 2020 can be summarized in variances in significant account activity as follows:

	Decrease (Increase) to Net Loss For the Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September, 2019
Revenues	$	(567,679	)
Cost of Revenue		181,669
Research, development and manufacturing operations		593,250
Selling, general and administrative expenses		1,040,799
Depreciation and Amortization Expense		47,185
Other Income / Expense
Other income/(expense), net		2,472,466
Interest Expense		3,513,228
Non-Cash Change in Fair Value of Derivatives and Gain/Loss on Extinguishment of Liabilities, net		2,277,285
Increase to Net Income	$	9,558,203

Liquidity and Capital Resources

Additional projected product revenues are not anticipated to result in a positive cash flow position for the years 2020 and 2021 overall and, as of September 30, 2020, the Company has negative working capital. As such, cash liquidity sufficient for the next twelve months will require additional financing.

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

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Statements of Cash Flows Comparison of the Nine Months Ended September 30, 2020 and 2019

For the nine months ended September 30, 2020, our cash used in operations was $1,473,988 compared to $2,565,168 for the nine months ended September 30, 2020, a decrease of $1,091,180. The decrease is primarily the result of reduced operations during the current period. For the nine months ended September 30, 2020, cash provided by investing activities was $254,444 compared to $826,746 for the nine months ended September 30, 2019, a decrease of $572,302. This change was primarily the result of a decrease in proceeds from the sale of assets. During the nine months ended September 30, 2020, negative operating cash flows of $1,473,988 were primarily funded through $2,000,000 in proceeds from stock issuance and $443,200 in proceeds from debt issuance.

Off Balance Sheet Transactions

As of September 30, 2020, we did not have any off balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk

We hold no significant funds and have no future obligations denominated in foreign currencies as of September 30, 2020.

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

Interest Rate Risk

Our exposure to market risks for changes in interest rates relates primarily to our cash equivalents and investment portfolio. As of September 30, 2020, our cash equivalents consisted only of operating accounts held with financial institutions. From time to time, we hold restricted funds, money market funds, investments in U.S. government securities and high quality corporate securities. The primary objective of our investment activities is to preserve principal and provide liquidity on demand, while at the same time maximizing the income we receive from our investments without significantly increasing risk. The direct risk to us associated with fluctuating interest rates is limited to our investment portfolio, and we do not believe a change in interest rates will have a significant impact on our financial position, results of operations, or cash flows.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures. Our management conducted an evaluation required by Rules 13a-15 and 15d-15 under the Exchange Act of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 and 15d-15 under the Exchange Act as of September 30, 2020. Based on this evaluation, our management concluded the design and operation of our disclosure controls and procedures were not effective as of September 30, 2020.

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Management’s Report on Internal Control over Financial Reporting

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

•

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

•

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

•

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

Under the supervision of the Audit Committee of the Board of Directors and with the participation of our management, including our Chief Executive Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, our management concluded our internal controls over financial reporting were not effective as of September 30, 2020. Our management reviewed the results of its assessment with the Audit Committee.

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

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

Material Weakness

Based on our assessment and the criteria used, management concluded that our internal control over financial reporting as of September 30, 2020 was not effective due to the material weaknesses described as follows:

•

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

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

•

Accounting for the Company's inventory and cost of revenue was lacking for the preparation of the September 30, 2020 financial statements. Miscalculations in these areas could impact the Company's current assets, revenues, operating results, and cash flows.

•

Accounting for the Company’s debt and equity securities was lacking for preparation of the September 30, 2020 financial statements. Miscalculations in this area could impact the Company’s liability, equity, and other expenses.

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

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Remediation Plan for Material Weaknesses in Internal Control over Financial Reporting

The Company’s financial challenges continued during the three months ended September 30, 2020, however, as discussed in Note 16. Subsequent Events, the Company received funding during the second half of 2020 and began to bring the Company back into operating status. The Company plans to execute the following steps, going forward, to remediate the aforementioned material weaknesses in its internal control over financial reporting:

•

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

•

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

•

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

•

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

Changes in Internal Control Over Financial Reporting

Except for the identification and mitigation of the material weaknesses noted above, there were no other changes in internal control over financial reporting during the three months ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

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

Item 1A. Risk Factors

The COVID-19 pandemic in the United States and world-wide has caused business disruption which may negatively impact the Company’s operations and results. While the disruption is currently expected to be temporary, there is considerable uncertainty around the duration. It is therefore likely there will be an impact on the Company’s operating activities and results. However, the related financial impact and duration cannot be reasonably estimated at this time.

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

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

Not required.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

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

EXHIBIT INDEX

Exhibit No.		Description

3.1		Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to our Registration Statement on Form SB-2 filed on January 23, 2006 (Reg. No. 333-131216))

3.2		Certificate of Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2011)

3.3		Certificate of Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed February 11, 2014)

3.4		Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated August 26, 2014. (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed September 2, 2014)

3.5		Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated October 27, 2014 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K dated October 28, 2014)

3.6		Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated December 22, 2014. (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K dated December 23, 2014)

3.7		Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed on February 17, 2009)

3.8		First Amendment to Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.3 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009)

3.9		Second Amendment to Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed January 25, 2013)

3.10		Third Amendment to Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed December 18, 2015)

3.11		Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated May 26, 2016 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed June 2, 2016)

3.12		Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated September 15, 2016 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed September 16, 2016)

3.13		Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated March 16, 2017 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed March 17, 2017)

3.14		Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated July 19, 2018 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed July 23, 2018)

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

4.1		Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to our Registration Statement on Form SB-2/A filed on June 6, 2006 (Reg. No. 333-131216))

4.2		Certificate of Designations of Series A Preferred Stock (filed as Exhibit 4.2 to our Registration Statement on Form S-3 filed July 1, 2013 (Reg. No. 333-189739))

10.1		GI Exchange Agreement dated September 9, 2020 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on December 28, 2020)

10.2		GI Exchange Note dated September 9, 2020 (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on December 28, 2020)

10.3		Series 1A Securities Purchase Agreement dated September 22, 2020 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on September 30, 2020)

10.4		Industrial Lease for 12300 Grant Street, Thornton, Colorado dated September 21, 2020 (incorporated by reference to our Annual Report on From 10-K for 2019 filed on January 29, 2021)

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

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

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

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

101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

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101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

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

*		Filed herewith

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ASCENT SOLAR TECHNOLOGIES, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 9th day of April, 2021.

	ASCENT SOLAR TECHNOLOGIES, INC.

April 9, 2021	By:	/s/ VICTOR LEE
		Lee Kong Hian (aka Victor Lee) President and Chief Executive Officer (Principal Executive Officer)

April 9, 2021	By:	/s/ MICHAEL J. GILBRETH
		Michael J. Gilbreth Chief Financial Officer (Principal Financial and Accounting Officer)

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. freshman Avg

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company