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 successfully develop and maintain strategic relationships
with key partners, including OEMs, system integrators, distributors,
retailers and e-commerce companies, who deal directly with end users in our
target markets;
• Our ability to maintain the listing of our common stock on the OTCBB Market;
• Our ability to implement remediation measures to address material weaknesses
in internal control;
• Our ability to achieve projected operational performance and cost metrics;
• Our ability to enter into commercially viable licensing, joint venture, or
other commercial arrangements; and
• Availability of raw materials.
Basis of Presentation: The accompanying condensed consolidated financial
statements (unaudited) have been derived from the accounting records of Ascent
Solar Technologies, Inc., Ascent Solar (Asia) Pte. Ltd., and Ascent Solar
(Shenzhen) Co., Ltd. (collectively, “the Company”) as of September 30, 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.
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.
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
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 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.
As a result of the Company's recurring losses from operations, and the need for
additional financing to fund its operating and capital requirements, there is
uncertainty regarding the Company's ability to maintain liquidity sufficient to
operate its business effectively, which raises substantial doubt as to the
Company's ability to continue as a going concern. The Company has scaled down
its operations, due to cash flow issues, and does not expect to ramp up until
significant financing is obtained.
Management cannot provide any assurances that the Company will be successful in
accomplishing any of its plans. These consolidated financial statements do not
include any adjustments that might be necessary should the Company be unable to
continue as a going concern.
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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.
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