Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________ 
FORM 10-Q
______________________________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2018
or
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from             to             
Commission File No. 001-32919
______________________________________________________ 
Ascent Solar Technologies, Inc.
(Exact name of registrant as specified in its charter)
 _______________________________________________________
Delaware
 
20-3672603
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
12300 Grant Street, Thornton, CO
 
80241
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number including area code: 720-872-5000  
_________________________________________________________
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     x   Yes     o   No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
 
o
  
Accelerated filer
 
o
 
 
 
 
Non-accelerated filer
 
o   (Do not check if a smaller reporting company)
  
Smaller reporting company
 
x
 
 
 
 
Emerging growth company
 
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
As of August 17, 2018 , there were 21,816,631 shares of our common stock issued and outstanding.


Table of Contents


ASCENT SOLAR TECHNOLOGIES, INC.
Quarterly Report on Form 10-Q
Quarterly Period Ended June 30, 2018
Table of Contents
 
 
 
 
 
Item 1.
 
 
 
 
Item 2.
Item 3.
Item 4.
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2

Table of Contents

PART I. FINANCIAL INFORMATION
 
Item 1. Condensed Consolidated Financial Statements

ASCENT SOLAR TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

 
 
 
June 30,
2018
 
December 31,
2017
ASSETS
 
(Unaudited)
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
 
$
25,901

 
$
89,618

Trade receivables, net of allowance for doubtful accounts of $39,333 and $48,201, respectively
 
43,984

 
6,658

Inventories, net
 
1,000,250

 
1,037,854

Prepaid expenses and other current assets
 
508,115

 
494,425

Total current assets
 
1,578,250

 
1,628,555

Property, Plant and Equipment
 
36,645,862

 
36,645,862

Less accumulated depreciation and amortization
 
(32,130,988
)
 
(32,013,686
)
 
 
4,514,874

 
4,632,176

Other Assets:
 
 
 
 
Patents, net of accumulated amortization of $479,685 and $430,071, respectively
 
1,341,108

 
1,470,796

Other non-current assets
 
35,937

 
49,813

 
 
1,377,045

 
1,520,609

Total Assets
 
$
7,470,169

 
$
7,781,340

LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
 
 
 
Current Liabilities:
 
 
 
 
Accounts payable
 
$
2,181,208

 
$
1,600,455

Related party payables
 
201,561

 
202,827

Accrued expenses
 
2,452,521

 
1,623,748

Notes payable
 
1,873,272

 
1,570,231

Current portion of long-term debt
 
354,884

 
343,395

Current portion of secured notes, net of discount of $2,488,113 and $1,934,304, respectively
 
1,577,724

 
253,590

Promissory Notes, net of discount of $59,792 and $20,626, respectively
 
1,322,145

 
948,811

October 2016 convertible notes
 
330,000

 
330,000

St. George convertible note, net of discount and cash payment premium of $384,709 and $673,241, respectively
 
929,525

 
1,032,592

BayBridge convertible note, net of discount of $50,400 and $565,000, respectively
 
1,600

 

Embedded derivative liabilities
 
7,746,770

 
6,406,833

Total current liabilities
 
18,971,210

 
14,312,482

 
 
 
 
 
Long-term debt, net of current portion
 
4,938,062

 
5,118,424

Long-term secured notes, net of current portion, and net of discount of $1,224,922 and $1,684,267, respectively
 
55,822

 
685,066

Accrued Warranty Liability
 
48,001

 
57,703

 
 
 
 
 
Commitments and Contingencies
 

 

 
 
 
 
 
Mezzanine Equity:
 
 
 
 
Series K preferred stock: 20,000 shares authorized; zero and 2,810 issued and outstanding, respectively
 

 
2,810,000

 
 
 
 
 
Stockholders’ Deficit:
 
 
 
 
Series A preferred stock, $.0001 par value; 750,000 shares authorized; 60,756 shares issued and outstanding, respectively ($791,992 and $761,864 Liquidation Preference)
 
6

 
6

Common stock, $0.0001 par value, 20,000,000,000 shares authorized; 18,994,481 and 9,606,598 shares issued and outstanding, respectively
 
1,899,448

 
960,660

Additional paid in capital
 
391,940,970

 
386,332,475

Accumulated deficit
 
(410,383,350
)
 
(402,495,476
)
Total stockholders’ deficit
 
(16,542,926
)
 
(15,202,335
)
Total Liabilities, Mezzanine Equity and Stockholders’ Deficit
 
$
7,470,169

 
$
7,781,340

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

3

Table of Contents

ASCENT SOLAR TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
For the Three Months Ended
 
For the six months ended
 
 
 
June 30,
 
June 30,
 
 
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
102,962

 
$
25,134

 
$
480,472

 
$
305,737

 
 
 
 
 
 
 
 
 
 
 
Costs and Expenses:
 
 
 
 
 
 
 
 
 
Cost of revenues (exclusive of depreciation shown below)
 
230,581

 
295,026

 
503,609

 
1,787,867

 
Research, development and manufacturing operations (exclusive of depreciation shown below)
 
700,045

 
1,241,108

 
1,873,081

 
2,517,974

 
Inventory impairment costs
 

 

 

 
363,758

 
Selling, general and administrative (exclusive of depreciation shown below)
 
700,615

 
1,405,863

 
1,636,141

 
3,170,094

 
Depreciation and amortization
 
97,446

 
330,324

 
198,220

 
701,976

 
Total Costs and Expenses
 
1,728,687

 
3,272,321

 
4,211,051

 
8,541,669

 
Loss from Operations
 
(1,625,725
)
 
(3,247,187
)
 
(3,730,579
)
 
(8,235,932
)
 
 
 
 
 
 
 
 
 
 
 
Other Income/(Expense)
 
 
 
 
 
 
 
 
 
Other Income/(Expense), net
 

 
(149,340
)
 

 
579,145

 
Interest expense
 
(2,128,698
)
 
(2,247,707
)
 
(3,472,429
)
 
(4,239,059
)
 
Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net
 
299,595

 
928,909

 
(684,866
)
 
1,601,987

 
Total Other Income/(Expense)
 
(1,829,103
)
 
(1,468,138
)
 
(4,157,295
)
 
(2,057,927
)
 
Net Loss
 
$
(3,454,828
)
 
$
(4,715,325
)
 
$
(7,887,874
)
 
$
(10,293,859
)
 
 
 
 
 
 
 
 
 
 
 
Net Loss Per Share (Basic and diluted)
 
$
(0.23
)
 
$
(0.81
)
 
$
(0.60
)
 
$
(2.96
)
 
Weighted Average Common Shares Outstanding (Basic and diluted)
 
16,617,799

 
4,668,930

 
13,822,617

 
9,361,114

 

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

4

Table of Contents

ASCENT SOLAR TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
 
six months ended
 
 
 
June 30,
 
 
 
2018
 
2017
 
Operating Activities:
 
 
 
 
 
Net loss
 
$
(7,887,874
)
 
$
(10,293,859
)
 
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
 
198,220

 
701,976

 
Share based compensation
 
21,346

 
95,911

 
Realized gain on sale of assets
 

 
(1,214,658
)
 
Amortization of financing costs to interest expense
 
10,833

 
70,556

 
Non-cash interest expense
 
801,610

 
727,732

 
Amortization of debt discount
 
2,450,664

 
3,190,185

 
Bad debt expense
 
(8,868
)
 
9,649

 
Accrued litigation settlement
 

 
(289,861
)
 
Write-down of inventory
 

 
363,758

 
Write down of patents
 
59,153

 

 
Warranty reserve
 
(9,702
)
 
(50,085
)
 
Change in fair value of derivatives and (gain)/loss on extinguishment of liabilities, net
 
684,866

 
(1,601,987
)
 
Inducement conversion costs
 

 
635,514

 
Changes in operating assets and liabilities:
 
     Accounts receivable
 
(28,458
)
 
396,467

 
     Inventories
 
37,604

 
1,010,196

 
     Prepaid expenses and other current assets
 
14,353

 
355,759

 
     Accounts payable
 
945,703

 
(340,200
)
 
     Related party payable
 
(1,266
)
 
(14,903
)
 
     Accrued expenses
 
531,086

 
(26,867
)
 
Net cash used in operating activities
 
(2,180,730
)
 
(6,274,717
)
 
Investing Activities:
 
 
 
 
 
Proceeds from the sale of assets
 

 
150,000

 
Patent activity costs
 
(9,705
)
 
(25,341
)
 
Net cash provided by/(used in) investing activities
 
(9,705
)
 
124,659

 
Financing Activities:
 
 
 
 
 
Proceeds from issuance of debt
 
2,357,500

 
2,865,000

 
Proceeds from issuance of stock
 

 
4,250,000

 
Repayment of debt
 
(230,782
)
 
(862,993
)
 
Net cash provided by financing activities
 
2,126,718

 
6,252,007

 
Net change in cash and cash equivalents
 
(63,717
)
 
101,949

 
Cash and cash equivalents at beginning of period
 
89,618

 
130,946

 
Cash and cash equivalents at end of period
 
$
25,901

 
$
232,895

 
Supplemental Cash Flow Information:
 
 
 
 
 
Cash paid for interest
 
$
211,166

 
$
206,080

 
Cash paid for income taxes
 

 

 
Non-Cash Transactions:
 
 
 
 
 
Non-cash conversions of convertible notes and preferred stock
 
$
5,140,600

 
$
6,934,064

 
Interest converted to principal
 
$
140,355

 
$

 
Initial derivatives
 
$
2,013,601

 
$

 
Make-whole dividend
 
$

 
$
257,152

 
Accounts payable converted to notes payable
 
$
308,041

 
$
1,422,026

 
Non-cash finance costs
 
$
25,000

 
$
2,500

 
Accounts payable forgiven in relation to Sale of EnerPlex
 
$

 
$
1,031,726

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

5

Table of Contents

ASCENT SOLAR TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1. ORGANIZATION

Ascent Solar Technologies, Inc. (“Ascent”) was incorporated on October 18, 2005 from the separation of ITN Energy Systems, Inc's (“ITN”) Advanced Photovoltaic Division and all of that division’s key personnel and core technologies. ITN, a private company incorporated in 1994, is an incubator dedicated to the development of thin-film, photovoltaic (“PV”), battery, fuel cell, and nano technologies. Through its work on research and development contracts for private and governmental entities, ITN developed proprietary processing and manufacturing know-how applicable to PV products generally, and to Copper-Indium-Gallium-diSelenide (“CIGS”) PV products in particular. ITN formed Ascent to commercialize its investment in CIGS PV technologies. In January 2006, in exchange for 5,140 shares of common stock of Ascent, ITN assigned to Ascent certain CIGS PV technologies and trade secrets and granted to Ascent a perpetual, exclusive, royalty-free worldwide license to use, in connection with the manufacture, development, marketing and commercialization of CIGS PV to produce solar power, certain of ITN’s existing and future proprietary and control technologies that, although non-specific to CIGS PV, Ascent believes will be useful in its production of PV modules for its target markets. Upon receipt of the necessary government approvals and pursuant to novation in early 2007, ITN assigned government-funded research and development contracts to Ascent and also transferred the key personnel working on the contracts to Ascent.

Currently, the Company is focusing on integrating its PV products into high value markets such as aerospace, satellites, near earth orbiting vehicles, fixed-wing unmanned aerial vehicles (UAV), military, and emergency preparedness. 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.

Sale of EnerPlex Brand

In February 2017, Ascent announced the sale of our EnerPlex brand and related intellectual properties and trademarks associated with EnerPlex to our battery product supplier, Sun Pleasure Co. Limited (“SPCL”), in an effort to better allocate its resources and to continue to focus on its core strength in the high-value specialty PV market. Effective February 27, 2017, Ascent no longer produces or sells Enerplex-branded consumer products. Ascent will supply solar PV products to SPCL, supporting the continuous growth of EnerPlex™ with Ascent’s proprietary and award-winning thin-film solar technologies and products.

Ascent continues to design and manufacture its own line of PV integrated consumer electronics, as well as portable power applications for commercial, military, and emergency management.

NOTE 2. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been derived from the accounting records of Ascent Solar Technologies, Inc., Ascent Solar (Asia) Pte. Ltd., and Ascent Solar (Shenzhen) Co., Ltd. (collectively, "the Company") as of June 30, 2018 and December 31, 2017 , and the results of operations for the three and six months ended June 30, 2018 and 2017 . Ascent Solar (Shenzhen) Co., Ltd. is wholly owned by Ascent Solar (Asia) Pte. Ltd., which is wholly owned by Ascent Solar Technologies, Inc. All significant inter-company balances and transactions have been eliminated in the accompanying condensed consolidated financial statements.
The 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, 2017 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, 2017 . 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, 2017 .

6


The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Operating results for the six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018 .

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, 2017 . There have been no significant changes to our accounting policies as of June 30, 2018 .

Recently Adopted or to be Adopted Accounting Policies

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) , and has issued a number of clarifying ASUs subsequently, all of which outline a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” The standard provides enhancements to the quality and consistency of how revenue is reported by companies, while also improving comparability in the financial statements of companies reporting using International Financial Reporting Standards or U.S. GAAP. The new standard also will require enhanced revenue disclosures, provide guidance for transactions that were not previously addressed comprehensively, and improve guidance for multiple-element arrangements. This accounting standard becomes effective for the Company for reporting periods beginning after December 15, 2018, and interim reporting periods thereafter. Early adoption is permitted for annual reporting periods (including interim periods) beginning after December 15, 2016. This new standard permits the use of either the retrospective or cumulative effect transition method. The implementation of ASU 2014-09 has not had a material effect on the Company's consolidated financial statements.
    
In February 2016, the FASB issued ASU No. 2016-02,  Leases (Topic 842) . ASU 2016-02 requires lessees to recognize all leases, including operating leases, on the balance sheet as a lease asset or lease liability, unless the lease is a short-term lease. ASU 2016-02 also requires additional disclosures regarding leasing arrangements. ASU 2016-02 is effective for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. The Company continues to evaluate the impact, that the adoption of this guidance will have on its consolidated financial statements.
    
In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718) . ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for interim periods and fiscal years beginning after December 15, 2017, and early application is permitted. The implementation of ASU 2017-09 did not have a material effect on the Company's consolidated financial statements.

In July 2017, the FASB issued ASU No. 2017-11 Part I, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) . ASU 2017-11 Part I changes the classification analysis of certain equity linked financial instruments with down round features. ASU 2017-11 Part I is effective, for public business entities, for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. The Company is currently evaluating the impact, if any, that the adoption of this guidance will have on its consolidated financial statements.

NOTE 4. LIQUIDITY AND CONTINUED OPERATIONS

During the six months ended June 30, 2018 and the year ended December 31, 2017 , the Company entered into multiple financing agreements to fund operations. Further discussion of these transactions can be found in Notes 7 through 15, and Note 18 of the financial statements presented as of, and for, the six months ended, June 30, 2018 , and in Notes 8 through 22 and Note 30 of the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 .

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 six months ended June 30, 2018 the Company used  $2.2 million  in cash for operations. The Company's primary significant long term cash obligation consists of a note payable of  $5.3 million  to a financial institution secured by a mortgage on its headquarters and manufacturing building in Thornton, Colorado. Total payments of approximately $0.3 million , including principal and interest, will come due in the remainder of 2018.

7



Additional projected product revenues are not anticipated to result in a positive cash flow position for the year 2018 overall and, as of June 30, 2018 , the Company has negative working capital. As such, cash liquidity sufficient for the year ending December 31, 2018 will require additional financing.

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

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

Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These condensed 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 June 30, 2018 and December 31, 2017 :
 
 
 
As of June 30,
 
As of December 31,
 
 
2018
 
2017
Building
 
$
5,828,960

 
$
5,828,960

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

 
489,421

Manufacturing machinery and equipment
 
30,327,481

 
30,327,481

Property, plant and equipment
 
36,645,862

 
36,645,862

Less: Accumulated depreciation and amortization
 
(32,130,988
)
 
(32,013,686
)
Net property, plant and equipment
 
$
4,514,874

 
$
4,632,176

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. No assets were impaired for the three and six months ended June 30, 2018 .
Depreciation expense for the three and six months ended June 30, 2018 was $58,566 and $117,302 , respectively, compared to depreciation expense of $288,493 and $623,116 for the three and six months ended June 30, 2017 , respectively. Depreciation expense is recorded under “Depreciation and amortization expense” in the Condensed Consolidated Statements of Operations.

NOTE 6. INVENTORIES
Inventories consisted of the following at June 30, 2018 and December 31, 2017 :
 
 
As of June 30,
 
As of December 31,
 
 
2018
 
2017
Raw materials
 
$
653,680

 
$
688,904

Work in process
 
25,040

 
11,878

Finished goods
 
321,530

 
337,072

Total
 
$
1,000,250

 
$
1,037,854

The Company analyzes its inventory for impairment, both categorically and as a group, whenever events or changes in circumstances indicate that the carrying amount of the inventory may not be recoverable. During the six months ended June 30, 2018 , the Company did not impair inventory, compared to an impairment of $363,758 , for the six months ended June 30, 2017 .

8


Inventory amounts are shown net of allowance of $457,617 and $562,140 as of June 30, 2018 and December 31, 2017 , respectively.

NOTE 7. NOTES PAYABLE

On February 24, 2017 , the Company entered into an agreement with a vendor to convert the balance of their account into three notes payable in the aggregate amount of $765,784 . The notes bear interest of 6% per annum and matured on February 24, 2018 ; all outstanding principal and accrued interest is due and payable upon maturity. On June 5, 2018, the Company entered into another agreement with the same vendor to convert the balance of their account into a fourth note payable with a principal amount of $308,041 , this note also bears interest at a rate of 6% per annum, and matures on July 31, 2018. As of June 30, 2018 , the Company had not made any payments on these notes; the total outstanding principal and accrued interest were $1,073,825 and $ 63,950 , respectively, and the note is due upon demand.

On March 23, 2017 , the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of $ 356,742 . The note bears interest of 5% per annum and matured on March 31, 2018 ; all outstanding principal and accrued interest is due and payable upon maturity. As of June 30, 2018 , the Company had not made any payments on the note, the accrued interest was $ 22,675 , and the note is due upon demand. Subsequent to the date of this report, the note was redeemed in stock; please see Note 18 for further information.

On June 30, 2017, the Company entered into an agreement with a vendor to convert the balance of their account into a note payable in the amount of $ 250,000 . The note bears interest of 5% per annum and matured on February 28, 2018 ; all outstanding principal and accrued interest is due and payable upon maturity. As of June 30, 2018 , the Company had not made any payments on these notes, the accrued interest was $12,500 , 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 matures on September 30, 2018 . The Company has not made the monthly payments of $18,426 that were to commence on October 30, 2017; as of June 30, 2018 the company had paid principal of $22,529 and interest of $897 . The remaining principal and interest balances, as of June 30, 2018 , were $192,705 and $6,607 , respectively.

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

On November 1, 2016, the Company and the CFHA agreed to modify the original agreement described above with the addition of a forbearance period. Per the modification agreement, no payments of principal and interest shall be due under the note during the forbearance period commencing on November 1, 2016 and continuing through April 1, 2017. The amount of interest that should have been paid by the Company during the forbearance period in the total amount of $180,043 shall be added to the outstanding principal balance of the note. As a result, on May 1, 2017, the principal balance of the note was $5,704,932 . Commencing on May 1, 2017, the monthly payments of principal and interest due under the note resumed at $57,801 , and the Company shall continue to make such monthly payments over the remaining term of the note ending on February 1, 2028.
The outstanding principal balance of the Permanent Loan was $5,292,946 and $5,461,819 as of June 30, 2018 and December 31, 2017 , respectively.







9


As of June 30, 2018 , remaining future principal payments on long-term debt are due as follows:
 
 
 
2018
$
174,523

2019
366,757

2020
391,709

2021
418,358

2022
446,821

Thereafter
3,494,778

 
$
5,292,946


NOTE 9. SECURED PROMISSORY AND CONVERTIBLE NOTES

Global Ichiban Secured Promissory Notes

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

Pursuant to the terms of the Note SPA, the Company and the Investor also agreed to exchange certain outstanding securities held by the Investor for additional Notes. As of November 30, 2017 , the Investor surrendered for cancellation (i) its outstanding promissory note dated September 13, 2017 ( $3,359,539 principal and accrued interest), (ii) its outstanding promissory note dated October 31, 2017 ( $252,466 principal and accrued interest), and (iii) its 400 shares of outstanding Series J Preferred Stock ( $445,222 of capital and accrued dividends). In exchange, the Company issued to the Investor $4,057,227 aggregate principal amount of additional Notes. Please refer to Note 11 and Note 21 of the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 for further discussion on the canceled promissory notes and the canceled Series J Preferred Stock shares.

All principal and accrued interest on the Notes are convertible at any time, in whole or in part, at the option of the Investor into shares of Common Stock at a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior 5 trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $2.00 per share

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

Of the Notes issued on November 30, 2017 , $3,359,539 aggregate principal amount will mature on December 15, 2020 . Principal and interest was originally to be payable in 36 equal monthly installments of $111,585 beginning January 15, 2018 . During the three months ended June 30, 2018 , principal of $176,000 was converted into 1,035,295 shares of common stock, and during the six months ended June 30, 2018 $140,355 of interest was converted to principal. The remaining note is payable in 30 equal monthly installments of $80,360 beginning July 15, 2018 . 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

 
$
1,426,000

$

3,486,276


Of the Notes issued on November 30, 2017 , $697,688 aggregate principal amount will mature on November 30, 2018 . Principal and interest will be payable upon maturity.


10


The $2,000,000 aggregate principal amount of Notes, issued in eight tranches, will mature on the first anniversary of the respective issuance date. Principal and interest will be payable upon maturity. As of June 30, 2018 , the closing dates, closing amounts, and maturity dates on completed Note SPA tranches are as follows:

Closing Date
Closing Amount
Maturity Date
11/30/2017
$
250,000

11/30/2018
12/28/2017
$
250,000

12/28/2018
1/11/2018
$
250,000

1/11/2019
1/25/2018
$
250,000

1/25/2019
2/8/2018
$
250,000

2/8/2019
2/21/2018
$
250,000

2/21/2019
3/7/2018
$
250,000

3/7/2019
3/21/2018
$
250,000

3/21/2019

The Notes will be secured by a security interest on substantially all of the Company’s assets, bear interest at a rate of 12% per annum and contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the Notes, and (ii) bankruptcy or insolvency of the Company. There are no registration rights applicable to the Notes.

As of June 30, 2018 , the aggregate principal and interest balance of the Notes were $4,771,582 and $183,618 , respectively.

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

Due to the varying terms and varying issue dates, the tranches of this instrument were broken into four separate instruments for valuation purposes.

1)
The first valuation was done on the November 30, 2017 Note with term of three years. The derivative value of this note was $3,742,002 as of December 31, 2017 .

1)
The second valuation was done on the group of Notes dated November 30, 2017, that had a term of one year. The derivative value of this group of notes was $888,168 as of December 31, 2017 .

2)
The third valuation was done on the Note dated December 28, 2017, which had a term of one year. The derivative value of this note was $267,008 on December 31, 2017 .

3)
For the Notes dated in the first quarter of 2018 , we did a fourth valuation. Although the notes were entered into at various dates, we used a weighted average issuance date of February 15, 2018 for a combined valuation purpose. Management's analysis, using the following assumptions: annual volatility of  54% present value discount rate of  12% and a dividend yield of  0% , resulted in a fair value of the embedded derivative associated with these Notes of $1,151,162 as of February 15, 2018 . The value of the embedded derivative associated with these Notes was recorded as a debt discount.

The derivative liability associated with the Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At June 30, 2018 , the Company conducted a fair value assessment of the embedded derivative associated with the three valuation groups discussed above.

1)
For the November 30, 2017 3yr Note: Management conducted a fair value assessment with the following assumptions: annual volatility of  62% present value discount rate of  12% and a dividend yield of  0% as of June 30, 2018 . As a result of the fair value assessment, the Company recorded a net gain of $424,530 as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of  $3,317,472  as of  June 30, 2018 .

11



2)
For the November 30, 2017 1yr Notes: Management conducted a fair value assessment with the following assumptions: annual volatility of  35% present value discount rate of  12% and a dividend yield of  0% as of June 30, 2018 . As a result of the fair value assessment, the Company recorded a net gain of $204,697 as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of  $683,471  as of  June 30, 2018 .

3)
For the December 28, 2017 1yr Note: Management conducted a fair value assessment with the following assumptions: annual volatility of  35% present value discount rate of  12% and a dividend yield of  0% as of June 30, 2018 . As a result of the fair value assessment, the Company recorded a net gain of $86,708 as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of  $180,300  as of  June 30, 2018 .

4)
For the first quarter 2018 1yr Notes: Management conducted a fair value assessment with the following assumptions: annual volatility of  52% present value discount rate of  12% and a dividend yield of  0% as of June 30, 2018 . As a result of the fair value assessment, the Company recorded a net gain of $69,365 as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Consolidated Statements of Operations to properly reflect the fair value of the embedded derivative of  $1,081,797  as of  June 30, 2018 .

During the three months ended June 30, 2018 , a cumulative net gain of $798,258 was recorded as a change in fair value. The total cumulative net gain for the six months ended June 30, 2018 was $785,300 to reflect a total derivative liability of $5,263,040 as of June 30, 2018 . Subsequent to the date of this report, the COmpany entered into another promissory note under this security agreement. Please refer to Note 18 for more information.


St. George Secured Convertible Note

On May 8, 2018, the Company, entered into a note purchase agreement with St. George Investments LLC, for the private placement of a $575,000 Secured Convertible Promissory Note. The Company received $500,000 in aggregate proceeds for the Secured Convertible Promissory Note in two tranches and recorded and original issue discount of $50,000 and debt financing costs of $25,000 . The original issue discount and the financing costs will be recognized as interest expense, ratably, over the life of the note. The Secured Convertible Promissory Note bears interest at a rate of 10% per annum and matures on May 9, 2019. All unredeemed principal and accrued interest is payable upon maturity. The note contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the Note, and (ii) bankruptcy or insolvency of the Company. In the event of default the interest rate increases to 22% per annum. The Secured Convertible Promissory Note is secured by a junior security interest on the Company's headquarters building, located in Thorton, Colorado. There are no registration rights applicable to this agreement.

As of June 30, 2018 , the aggregate principal and interest balance of the Secured Convertible Promissory Note were $575,000 and $8,349 , respectively.

Beginning in early November 2018, St. George shall have the option to require the Company to redeem all or a portion of the amounts outstanding under the note. The Company may pay the requested redemption amounts in cash or in the form of shares of Common Stock (subject to certain specified equity conditions). Payments in the form of Common Stock shall be calculated using a variable conversion price equal to (i) 60% of the average of the two lowest closing bid prices for the shares over (ii) the prior ten day trading period immediately preceding the redemption.

Shares of Common Stock may not be issued pursuant to the note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the outstanding shares of Common Stock. This ownership limitation will be automatically increased to 9.99% if the Company’s market capitalization is less than $10 million . The ownership limitation can also be increased at the option of the Investor (up to a maximum of 9.99% ) upon 61 days advance written notice.

Pursuant to a number of factors outlined in ASC Topic 815,  Derivatives and Hedging , the redemption option in the Secured Convertible Promissotry 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 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 note approximates

12


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: annual volatility of 50% , present value discount rate of 12% , and a dividend yield rate of 0% . These assumption resulted in the fair value of the embedded derivative of $862,439 , associated with this note at inception.

The derivative liability associated with the Secured Convertible Promissory Note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At  June 30, 2018 , the Company conducted a fair value assessment of the embedded derivative associated with the note. As a result of the fair value assessment, the Company recorded a  $19,432  gain 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  $843,007  as of  June 30, 2018 .

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 Secured Convertible Promissory Note approximates management’s estimate of the fair value of the embedded derivative liability at  June 30, 2018  based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of  33% , present value discount rate of  12% and dividend yield of  0% .

NOTE 10. PROMISSORY NOTES

Offering of Unsecured, Non-Convertible Notes

During October 2016, the Company received $420,000 from a separate private investor. 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 will be charged to interest expense ratably over the term of the note. The note bears interest at 12% per annum and matures on July 17, 2017 . Principal and interest on this note are payable at maturity. This note is not convertible into equity shares of the Company and is unsecured.

On June 30, 2017, the Company and the private investor 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 all the payments according to this payment plan, and the note is payable upon demand.

As of June 30, 2018 , $ 205,563 of principal and $ 45,414 of interest had been paid on this note. The outstanding principal and accrued interest balances on the note as of June 30, 2018 were $494,437 and $ 56,549 , respectively.

On November 16, 2017 , the Company initiated a non-convertible, unsecured promissory note with a private investor for $275,000 . The promissory note was issued with an original issue discount of $25,000 , resulting in proceeds to the company of $250,000 . The note does not have a stated interest rate and matured on December 18, 2017 . As of June 30, 2018 , no payments had been made on this note and the Company has accrued interest at an inferred rate of 12% resulting in an accrued interest balance of $17,811 , as of June 30, 2018 . This note is payable upon demand. Subsequent to the date of this report, this promissory note was exchanged for a convertible note; please refer to Note 18 for further information.

On January 31, 2018 , the Company initiated a non-convertible, unsecured promissory note with a private investor for an aggregate principal amount of $200,000 . The promissory note was issued with an original issue discount of $22,500 , which will be recorded as interest expense ratably over the term of the note, resulting in proceeds to the company of $177,500 , which was received in December 2017. The note bears interest at 12% per annum and matures on December 29, 2018 . All principal and interest is payable upon maturity. As of June 30, 2018 , the remaining principal and interest on on this note were $200,000 and $12,033 , respectively.

On June 6, 2018 , the Company initiated a non-convertible, unsecured promissory note with a private investor for an aggregate principal amount of $315,000 . The promissory note was issued with an original issue discount of $55,000 , which will be 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 matures on June 6, 2019 . All principal and interest is payable upon maturity. As of June 30, 2018 , the remaining principal and interest on on this note were $315,000 and $7,664 , respectively.


13


During May and June 2018, the Company received undocumented proceeds of $97,500 from a private investor. Subsequent to the date of this report, $87,500 of the proceeds were documented into a promissory note (please refer to Note 18 for further information) and the remaining $10,000 in proceeds remains undocumented as of the filing date of this report. The Company has accrued interest on these undocumented funds at an inferred rate of 12% per annum, and the accrued interest balance was $1,078 as of June 30, 2018 .

NOTE 11. OCTOBER 2016 CONVERTIBLE NOTES

October 2016 Convertible Notes

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

Unless earlier converted or prepaid, the October 2016 Convertible Notes matured on December 31, 2017. The October 2016 Convertible Notes 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 (as described below). Principal and accrued interest on the October 2016 Convertible Notes is payable upon demand.

All principal and accrued interest on the October 2016 Convertible Notes are convertible at any time, in whole or in part, at the option of Adar Bays, into shares of common stock at a variable conversion price equal to 80% of the lowest closing bid price of the Company’s common stock for the fifteen consecutive trading day period prior to the conversion date. After the six month anniversary of the issuance of any October 2016 Convertible Note, the conversion price for such note shall thereafter be equal to 50% of the lowest closing bid price of the Company’s common stock for the fifteen consecutive trading day period prior to the conversion date.

The October 2016 Convertible Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the October 2016 Convertible Notes; and (ii) bankruptcy or insolvency of the Company.

Outstanding principal and accrued interest on the October 2016 Convertible Notes were $330,000 and $34,815 , respectively as of June 30, 2018 .

Pursuant to a number of factors outlined in ASC Topic 815,  Derivatives and Hedging , the conversion option in the October 2016 Convertible Notes were deemed to include an embedded derivative that required bifurcation and separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the convertible issuance and appropriately recorded that value as a derivative liability. At closing, a derivative liability and a corresponding debt discount in the amount of  $330,000  was recorded. The fair value of the derivative was greater than the face value at issuance and the difference of $341,114 was charged to interest expense at issuance. The remaining debt discount will be charged to interest expense ratably over the life of the October 2016 Convertible Notes. As of December 31, 2017 , the fair value of the derivative liability was $572,643 .

The derivative liability associated with the October 2016 Convertible Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At June 30, 2018 , the Company conducted a fair value assessment of the embedded derivative associated with the October 2016 Convertible Notes. As a result of the fair value assessment, the Company recorded a $75,575 loss as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended June 30, 2018 . A total net loss of $137,851 was recorded for the six months ended June 30, 2018 , to properly reflect the fair value of the embedded derivative of $710,494 as of June 30, 2018 .

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 October 2016 Convertible Notes approximates management’s estimate of the fair value of the embedded derivative liability at  June 30, 2018  based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of  35% present value discount rate of  12% and dividend yield of  0% .






14


NOTE 12. ST. GEORGE CONVERTIBLE NOTE

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

Unless earlier converted or prepaid, the convertible notes will mature on March 11, 2019 . The notes do not bear interest in the absence of an event of default.

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

Redemption amounts are payable by the Company in cash. Beginning ten months after the issuance of the convertible notes, cash redemption payments by the Company will be subject to a 15% redemption premium.

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

In lieu of making the December 2017 through March 2018 cash payments, the share reserve was increased by 5 million shares, and on May 1, 2018, effective as of April 3, 2018, the parties agreed to amend the variable conversion price formula outlined in the SPA. As amended, payments in the form of shares would be calculated using a variable conversion price equal to the lower of (i) 60% of the lowest VWAP for the shares during the prior five trading days or (ii) the closing bid price for the shares on the prior trading day.

All principal and accrued interest on the Notes are convertible at any time, in whole or in part, at the option of the Investor into shares of Common Stock at a fixed conversion price of $4 per share.

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

In connection with the closing under the Note SPA, the Company issued 37,500 unregistered shares of common stock to the Investor as an origination fee. The closing stock price on the date of close was $1.7 resulting in an interest expense of $ 63,750 being recorded as of the date of close.

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

As of June 30, 2018 , cash payments of $191,667 had been made on this note, and $391,600 had been converted into 2,270,278 shares of the Company's common stock. The remaining balance on the note was $1,141,733 as of June 30, 2018 . The following table summarizes the conversion activity of this note:


15


Conversion Period
Principal Converted
Common Shares Issued
Q1 2018
$
75,000

187,500

Q2 2018
$
316,600

2,082,778

 
$
391,600

$
2,270,278

 

Pursuant to a number of factors outlined in ASC Topic 815,  Derivatives and Hedging , the conversion option in the Convertible Promissory 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. As of December 31, 2017 , the derivative liability was  $394,280 .

The derivative liability associated with the Convertible Promissory Notes is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At June 30, 2018 , the Company conducted a fair value assessment of the embedded derivative associated with the St. George Convertible Notes. As a result of the fair value assessment, the Company recorded a $316,636 net gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended June 30, 2018 . The total net loss recorded for the six months ended June 30, 2018 was $508,264 , to properly reflect the fair value of the embedded derivative of $902,544 as of June 30, 2018 .

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 Convertible Promissory Notes approximates management’s estimate of the fair value of the embedded derivative liability at  June 30, 2018  based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of  34% present value discount rate of  12% and dividend yield of  0% .

NOTE 13. BAYBRIDGE CONVERTIBLE NOTE

On December 6, 2017 , the Company entered into a securities exchange agreement (the “Exchange Agreement”) with BayBridge Capital Fund LP (“BayBridge”).

Pursuant to the terms of the Exchange Agreement, the Investor agreed to surrender and exchange 675 shares of outstanding Series J Preferred Stock ( $755,417 of capital and accrued dividends). In exchange, the Company issued to the Investor an unsecured promissory note with an aggregate principal amount of $840,000 (the “Exchange Note”), with an original issue discount of $84,583 . Please refer to Note 21 of the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 for further discussion on the Series J Preferred Stock.

The Exchange Note is unsecured, has no applicable registration rights, bears interest at a rate of 12% per annum, matures on December 6, 2018 , and contains standard and customary events of default including but not limited to: (i) failure to make payments when due under the Exchange Note, and (ii) bankruptcy or insolvency of the Company. Principal and interest are payable upon maturity.

Payments of principal and accrued interest on the Exchange Note are payable in cash or, at the option of the Company, in shares of Common Stock at a variable conversion price equal to the lowest of (i) 85% of the average VWAP for the shares over the prior 5 trading days, (ii) the closing bid price for the shares on the prior trading day, or (iii) $3.00 per share. Payments in shares of Common Stock may not be issued pursuant to the Exchange Note if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of Common Stock.

As of June 30, 2018 , principal of $788,000 and interest of $26,807 had been converted into 3,333,242 shares of common stock and no cash payments of principal or interest had been made. The principal and accrued interest balances as of June 30, 2018 were $52,000 and $685 , respectively. The following table summarizes the conversion activity of this note:


16


Conversion Period
Principal Converted
Interest Converted
Common Shares Issued
Q4 2017
$
275,000

$

404,412

Q1 2018
$
105,000

$
20,717

493,007

Q2 2018
$
408,000

$
6,090

2,435,823

 
$
788,000

$
26,807

3,333,242



Pursuant to a number of factors outlined in ASC Topic 815,  Derivatives and Hedging , the conversion option in the 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 and appropriately recorded that value as a derivative liability. At December 31, 2017 , the derivative liability associated with the promissory note was $542,733 .

The derivative liability associated with the Exchange Note is subject to revaluation on a quarterly basis to reflect the market value change of the embedded conversion option. At  June 30, 2018 , the Company conducted a fair value assessment of the embedded derivative associated with the Exchange Note. As a result of the fair value assessment, the Company recorded a $165,999 gain as "Change in fair value of derivatives and gain/(loss) on extinguishment of liabilities, net" in the Condensed Consolidated Statements of Operations for the three months ended June 30, 2018 .  The total gain recorded as of the six months ended June 30, 2018 , was $515,047  , to properly reflect the fair value of the embedded derivative of  $27,686  as of  June 30, 2018 .

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 Exchange Note approximates management’s estimate of the fair value of the embedded derivative liability at  June 30, 2018  based on using a Monte Carlo simulation following a Geometric Brownian Motion with the following assumptions: annual volatility of  36% , present value discount rate of  12% and dividend yield of  0% .

NOTE 14. SERIES A PREFERRED STOCK

In June 2013, the Company entered into a Securities Purchase Agreement with an investor to sell an aggregate of 750,000 shares of Series A Preferred Stock at a price of $8.00 per share, resulting in gross proceeds of $6,000,000 . This purchase agreement included warrants to purchase up to 13,125 shares of common stock of the Company. The transfer of cash and securities took place incrementally, the first closing occurring on June 17, 2013 with the transfer of 125,000 shares of Series A Preferred Stock and a warrant to purchase 2,187 shares of common stock for $1,000,000 . The final closings took place in August 2013, with the transfer of 625,000 shares of Series A Preferred Stock and a warrant to purchase 10,938 shares of common stock for $5,000,000 .

Holders of Series A Preferred Stock are entitled to cumulative dividends at a rate of 8% per annum when and if declared by the Board of Directors in its sole discretion. The dividends may be paid in cash or in the form of common stock (valued at 10% below market price, but not to exceed the lowest closing price during the applicable measurement period), at the discretion of the Board of Directors. The dividend rate on the Series A Preferred Stock is indexed to the Company's stock price and subject to adjustment. 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 and future conversions and redemptions will be paid out with accrued dividends per the holding period of the shares of Series A Preferred stock. Please see Note 23 of the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 for more information.

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 20 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 June 30, 2018 , 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.


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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.

As of March 31, 2017, the investor had elected to exchange all outstanding October 2016 Convertible Notes, in accordance with the exchange agreement, resulting in the exchange of 104,785 shares of Series A Preferred Stock. As of March 31, 2017, the investor had also converted their 104,785 shares of Series A Preferred Stock, and the related make whole dividend, which resulted in the issuance of 173,947 shares of common stock.
   
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 June 30, 2018 , there were 60,756 shares of Series A Preferred Stock outstanding and accrued and unpaid dividends of $310,362 .

NOTE 15. SERIES K PREFERRED STOCK

On February 8, 2017, the Company, entered into a securities purchase agreement (“Series K SPA”) with a private investor (“Investor”), for the private placement of up to $20,000,000 of the Company’s newly designated Series K Convertible Preferred Stock (“Series K Preferred Stock”).

Per the terms of the Series K SPA, the Company was scheduled to sell 1,000 shares of Series K Preferred Stock to Investor in exchange for $1,000,000 of gross proceeds on or before each of (i) February 24, 2017, (ii) March 27, 2017, (iii) April 27, 2017, (iv) May 27, 2017 and (v) June 27, 2017. The Company was also scheduled to sell 15,000 shares of Series K Preferred Stock to Investor in exchange for $15,000,000 of gross proceeds on or before July 27, 2017. As of June 30, 2018 , the Company had sold 9,010 shares of Series K Preferred Stock in exchange for $9,010,000 in cash proceeds from the private investor. The Company does not expect to receive any more funding from this investor. The following summarizes the closings and proceeds received as of June 30, 2018 :

Closing Period
Preferred Series K Shares Purchased
Closing Amount
Q1 2017
150

150,000

Q2 2017
4,100

4,100,000

Q3 2017
4,760

4,760,000

 
9,010

9,010,000


The Series K Preferred Stock ranks senior to the Company’s common stock in respect to dividends and rights upon liquidation. The Series K Preferred Stock will not have voting rights and the holders of the Series K Preferred Stock will not be entitled to any fixed rate of dividends.

The shares of the Series K Preferred Stock will be convertible at the option of the holder into common stock at a fixed conversion price equal to $0.004 . At no time may the Series K Preferred Stock be converted if the number of shares of common stock to be received by Investor pursuant to such conversion, when aggregated with all other shares of common stock then beneficially (or deemed beneficially) owned by Investor, would result in Investor beneficially owning more than 19.99% of all common stock then outstanding. As of June 30, 2018 , the investor had converted all of the Series K Preferred Stock into shares of common stock. The following table summarizes the conversion activity of Series K Preferred Stock:


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Conversion Period
Preferred Series K Shares Converted
Value of Series K Preferred Shares
Common Shares Issued
Q2 2017
3,200

$
3,200,000

800,000

Q3 2017
3,000

$
3,000,000

750,000

Q2 2018
2,810

$
2,810,000

702,500

 
9,010

9,010,000

2,252,500


As of June 30, 2018 , the investor owned approximately 12% of the Company's outstanding common stock.

The Company is required to redeem for cash any outstanding shares of the Series K Preferred Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends (if any) thereon on the fifth anniversary of the date of the original issue of such shares.

Upon our liquidation, dissolution or winding up, holders of Series K Preferred Stock will be entitled to be paid out of our assets, prior to the holders of our common stock, an amount equal to $1,000 per share plus any accrued but unpaid dividends (if any) thereon.

Upon issuance, in accordance with ASC 480-10, the Series K Preferred Stock was classified as a liability on the Consolidated Balance Sheets. Pursuant to a number of factors outlined in ASC Topic 815, the conversion option in the Series K Preferred Stock was deemed to not require bifurcation or separate accounting treatment.

NOTE 16. STOCKHOLDERS’ DEFICIT

Common Stock

Reverse Stock Split
On July 20, 2018, the Company, a Delaware corporation, filed a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company (the “Certificate of Amendment”) with the Secretary of State of the State of Delaware to effect a reverse stock split of the Company’s common stock, par value $0.0001 per share, at a ratio of one-for-one thousand (the “Reverse Stock Split”). The Certificate of Amendment did not change the number of authorized shares, or the par value, of the Company’s common stock. The Certificate of Amendment provides that every thousand shares of the Company’s issued and outstanding common stock were automatically combined into one issued and outstanding share of the Company’s common stock. All shares and per share amounts in the consolidated financial statements and accompanying notes have been retroactively adjusted to give effect to the Reverse Stock Split.

At June 30, 2018 , the Company had 20,000,000,000 shares of common stock, $0.0001 par value, authorized for issuance. Each share of common stock has the right to one vote. As of June 30, 2018 , the Company had 18,994,481 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through June 30, 2018 .

Preferred Stock

At June 30, 2018 , the Company had 750,000 shares of preferred stock, $0.0001 par value, authorized for issuance. Preferred stock may be issued in classes or series. Designations, powers, preferences, rights, qualifications, limitations and restrictions are determined by the Company’s Board of Directors. 

The following table summarizes the designations, shares authorized, and shares outstanding for the Company's Preferred Stock:
Preferred Stock Series Designation
Shares Outstanding
Series A
60,756

Series K






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Series A Preferred Stock

Refer to Note 14 descriptions of Series A Preferred Stock.

Series K Preferred Stock
Refer to Note 15 descriptions of Series K Preferred Stock.
Warrants

As of December 31, 2017, the Company had three outstanding warrants for an aggregate of 700,000 shares of common stock: i) a warrant for 250,000 shares of common stock which is exercisable at a fixed strike price of $4.00 and expires on July 24, 2018 ; ii) a warrant for 250,000 shares of common stock which is exercisable at a fixed strike price of $3.00 and expires on August 10, 2018 ; and iii) a warrant for 200,000 shares of common stock which is exercisable at a fixed strike price of $1.80 and expires on June 30, 2018 . None of the warrants may not be exercised if, after giving effect to the exercise, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company's outstanding shares of common stock. Please refer to Note 24 of the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 for further information about each warrant issuance.

On June 30, 2018 , the warrant granted for 200,000 shares of common stock, exercisable at a fixed strike price of $1.80 , expired unexercised. As of June 30, 2018 , the Company had two remaining outstanding warrants for an aggregate of 500,000 shares of common stock. Subsequent to the date of this report, these two warrants also expired unexercised.

The following table summarizes warrant activity:

 
Warrant
Shares
Warrant
Weighted
Average
Exercise Price
Outstanding at December 31, 2016

$

Granted
700,000

$
3.01

Exercised

$

Canceled/Expired

$

Outstanding at December 31, 2017
700,000

$
3.01

Granted

$

Exercised

$

Canceled/Expired
(200,000
)
$
1.80

Outstanding at June 30, 2018
500,000

$
3.50

Exercisable at June 30, 2018
500,000

$
3.50



NOTE 17. 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 six months ended June 30,
 
 
 
2018
 
2017
 
Share-based compensation cost included in:
 
 
 
 
 
Research and development
 
$
642

 
$
16,898

 
Selling, general and administrative
 
20,704

 
79,013

 
Total share-based compensation cost
 
$
21,346

 
$
95,911

 

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The following table presents share-based compensation expense by type:

 
 
For the six months ended June 30,
 
 
 
2018
 
2017
 
Type of Award:
 
 
 
 
 
Stock Options
 
$
21,346

 
$
69,582

 
Restricted Stock Units and Awards
 

 
26,329

 
Total share-based compensation cost
 
$
21,346

 
$
95,911

 

Stock Options: The Company recognized share-based compensation expense for stock options of approximately $21,000 to officers, directors and employees for the six months ended June 30, 2018 related to stock option awards ultimately expected to vest. There were no stock options granted during the six months ended June 30, 2018 or during the six months ended June 30, 2017 .
As of June 30, 2018 , total compensation cost related to non-vested stock options not yet recognized was approximately $20,000 which is expected to be recognized over a weighted average period of approximately 1.0 year, 66 shares were vested or expected to vest in the future at a weighted average exercise price of $31,820 , and 200 shares remained available for future grants under the Option Plan.
Restricted Stock: The Company did not recognized share-based compensation expense related to restricted stock grants for the six months ended June 30, 2018 . During the six months ended June 30, 2017 , the Company recognized approximately $26,000 in share-based compensation related to restricted stock grants. There were no restricted stock grants for the six months ended June 30, 2018 or the six months ended June 30, 2017 .

As of June 30, 2018 , there was no unrecognized share-based compensation expense from unvested restricted stock, no shares were expected to vest in the future, and 519 shares remained available for future grants under the Restricted Stock Plan.

NOTE 18. SUBSEQUENT EVENTS

Offering of Secured Non-Convertible Notes

On July 6, 2018, the Company issued a $135,000 promissory note, to Global Ichiban Ltd., in exchange for gross proceeds of $120,000 . This note bears interest at a rate of 12% per annum and matures on July 6, 2019. Principal and interest on this note are payable at maturity. This note is secured by a security interest on substantially all of the Company's assets, pursuant to the Security Agreement dated November 30, 2017. Please refer to Note 9 for further details on the Security Agreement.

Reverse Stock Split

On July 19, 2018, the Company , filed a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company (the “ Certificate of Amendment ”) with the Secretary of State of the State of Delaware to effect a reverse stock split of the Company’s common stock, par value $0.0001 per share (the “ Common Stock ”) at a ratio of one-for-one thousand (the “ Reverse Stock Split ”).

The Certificate of Amendment provides that the Reverse Stock Split became effective as of 5:00 p.m. Eastern Time on July 20, 2018 (the “ Effective Time ”), at which time every thousand shares of the Company’s issued and outstanding Common Stock were automatically combined into one issued and outstanding share of Common Stock, without any change in the par value per share. The Certificate of Amendment provides that in the event a stockholder would otherwise be entitled to receive a fraction of a share of Common Stock, such stockholder shall receive one whole share of Common Stock in lieu of such fractional share and no fractional shares shall be issued.

Following the Reverse Stock Split, the Company has approximately 19 million shares of Common Stock issued and outstanding. The number of authorized shares of the Company’s Common Stock remains at 20 billion . The number of shares of the Company’s Series A preferred stock outstanding was not affected by the Reverse Stock Split. However, the number of shares of Common Stock into which each outstanding share of Series A preferred stock is convertible will be adjusted proportionately as a result of

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the Reverse Stock Split. All outstanding RSUs, stock options, warrants and rights to purchase shares of Common Stock will be adjusted proportionately.

Trading of the Company’s Common Stock continued on the OTC Marketplace on a split-adjusted basis on July 23, 2018. The Company's Common Stock will temporarily trade under the symbol "ASTID," with a "D" added for 20 trading days to signify that the Reverse Stock Split has occurred.  After 20 trading days, the trading symbol will revert back to ASTI. The new CUSIP number for the Common Stock following the Reverse Stock Split is 043635507.

At the Company’s 2018 Annual Meeting of Stockholders, the Company’s stockholders approved a reverse stock split of the Common Stock at a ratio ranging from one-for-one hundred to one-for-one thousand, with such ratio to be determined by the Company’s Board of Directors in its discretion without further approval from the Company’s stockholders. The Board of Directors of the Company subsequently authorized proceeding with the Reverse Stock Split at a ratio of one-for-one thousand.

Offering of Unsecured Promissory Note

On July 24, 2018, the Company sold and issued to a private investor a $115,000 aggregate principal amount unsecured original issue discount note (the “Note”) in exchange for $87,500 of gross proceeds. The Note is unsecured and non-convertible, bears interest at a rate of 12% per annum, and will mature on January 24, 2019; principal and interest on the Note will be payable upon maturity.

Exchange of Outstanding Promissory Note for Unsecured Convertible Note

On July 25, 2017, the Company, entered into a securities exchange agreement (the “Exchange Agreement”) with a private investor. Pursuant to the terms of the Exchange Agreement, the investor agreed to surrender and exchange a promissory note with a principal balance of $275,000 . In exchange, the Company issued to the investor an unsecured convertible note with an aggregate principal amount of $300,000 (the “Exchange Note”).

The Exchange Note is not secured, bears interest at a rate of 12% per annum, and will mature on January 25, 2019; principal and interest on the Exchange Note are due upon maturity.

The investor shall have the right, from and after the date of issuance of this note and then at any time until the note is fully paid, to convert any outstanding and unpaid principal into shares of the Company's common stock at a variable conversion price equal to the lesser of (i) a price equal to $0.20 , or (ii) 80% of the lowest traded price for the shares over the prior ten trading days.

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

On August 13, 2018, the investor converted $25,000 of principal and $158 in accrued interest for 683,650 shares of common stock. The principal balance of the Exchange Note, as of the date of this filing, is $275,000 .

Redemption of Note Payable

On July 25, 2018, a vendor holding a note payable with the principal amount of $356,742 , elected to redeem the note, along with $23,897 in accrued interest, for 2,138,421 shares of common stock. The conversion rate was based on the average of the prior five trading days' closing price.

Offering of Promissory Note

On July 27, 2018, the Company entered into an agreement with a vendor to convert the balance of their account into an unsecured note payable in the amount of $41,452 . This note bears interest of 10.4% per annum and matures on December 15, 2018, with a possible extension to March 15, 2109. This note requires $1,000 principal payments, plus accrued interest, on a bi-weekly basis. As of the date of this filing, the installment payments have been paid by the Company per the agreed upon schedule.

Offering of Convertible Note

On August 1, 2018, the Company, entered into a note purchase (the “Note SPA”) with Power Up Lending Group LTD. (“Investor”), for the private placement of a $130,000 Convertible Promissory Note (“Note”). On August 2, 2018, the Company received $130,000 of gross proceeds from the offering of the Note. The note is unsecured, bears interest at a rate of 8% per annum,

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and matures on August 1, 2019; principal and interest is due upon maturity. In the event of default, the interest rate per annum increases to 22% .

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

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

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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 photovoltaic modules using our proprietary technology. For the three and six months ended June 30, 2018 , we generated $102,962 and $467,987 of revenue from product sales, respectively. During the six months ended June 30, 2018 , we generated $12,485 in revenue from a government contract.

In 2012, we evolved our business model to include B2C, solution based, PV integrated consumer electronics to our off grid high value solar power generation strategy. In June of 2012, we launched our new line of consumer products under the EnerPlex™ brand, and introduced our first product, the Surfr™, a battery and solar case for the Apple® iPhone® 4/4S smart phone, featuring our ultra-light CIGS thin film technology integrated directly into the case. The case incorporates our ultra-light and thin PV module into a sleek, protective iPhone 4/4S case, along with a thin, life extending, lithium-polymer battery. The case adds minimal weight and size to an iPhone smartphone, yet provides supplemental charging when needed. In August of 2012, we announced the launch of the second version of the Surfr for the Samsung® Galaxy S® III, which provides 85% additional battery life.

In December 2012, we launched the EnerPlex Kickr™ and EnerPlex Jumpr™ product series. The Kickr IV is an extremely portable, compact and durable solar charging device, approximately seven inches by seven inches when folded, and weighs less than half a pound. The Kickr IV provides 6.5 watts of regulated power that can help charge phones, digital cameras, and other small USB enabled devices. The Kickr IV is ideal for outdoor activities such as camping, hiking and mountain climbing as well as daily city use. To complement the Kickr IV, we also released the Jumpr series of portable power banks in December of 2012. The Jumpr series provides a compact power storage solution for those who need to recharge their portable electronics while on the go.

During 2013, the EnerPlex brand rapidly expanded with the addition of two new product series as well as over fifteen new products. In 2013, we introduced further additions to the Jumpr line of portable power banks; releasing the Jumpr Mini and Jumpr Stack in August and the Jumpr Max in September. The latest additions to the Kickr line of portable solar chargers, the Kickr I and Kickr II, were introduced in August at the Outdoor Retailer show. Furthermore, in October 2013, we released our first series of solar integrated backpacks, the EnerPlex Packr™. The Packr is a functional backpack ideal for charging mobile electronic devices while on the go. Also in October of 2013, we introduced the Surfr battery and solar case for the Samsung Galaxy S® 4, and in December, we introduced the Surfr battery and solar case for Apple’s iPhone® 5. To complement our flagship product lines, we added an assortment of accessories, all of which can be integrated into the EnerPlex ecosystem of products; such as the LED wand which can be easily plugged into a Jumpr power bank to provide hours of light, or the Travel Adaptor, which enables consumers to charge up their Jumpr power banks from a traditional outlet anywhere in the world.
 
Beginning in 2013, we aggressively pursued new distribution channels for the EnerPlex brand; these activities have led to placement in a variety of high-traffic ecommerce venues such as www.amazon.com, www.walmart.com, www.brookstone.com, www.newegg.com, as well as many others including our own e-commerce platform at www.goenerplex.com. The April 2013 placement of EnerPlex products at Fry’s Electronics, a US West Coast consumer electronics retailer, represented the company’s first domestic retail presence; EnerPlex products were carried in all of Fry’s 34 superstores across 9 states.
    
Throughout 2014, EnerPlex released multiple additions to the Jumpr line of products: including the Jumpr Stack 3, 6 and 9; innovative batteries equipped with tethered micro-USB and Apple Lightning cables with a revolutionary Stack and Charge design, enabling batteries to be charged simultaneously when they are placed on top of one another. Also released in 2014 were the Jumpr Slate series, products which push the boundaries of how thin batteries can be; the Jumpr Slate 10k, at less than 7mm thick was the thinnest lithium polymer battery available when it was released. The Jumpr Slate 5k and 5k Lightning each come with a tethered micro-USB and Lightning cable respectively; freeing consumers from worrying about toting extra cables with them while on the move.



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Table of Contents

At Outdoor Retailer 2014, EnerPlex debuted the Generatr Series. The Generatr 1200 and Generatr 100 are lithium-ion based, large format batteries. Lighter and smaller than competitors, the Generatr Series are targeted for consumers who require high-capacity, high-output batteries which remain ultra-portable. Also debuted at Outdoor Retailer was the Commandr 20, a high output solar charger designed specifically to integrate with and charge the Generatr series, allowing consumers to stay out longer without needing to charge their Generatr batteries from a traditional power source. In August 2014, the Kickr II+ and IV+ were also announced, these products represent another evolution in EnerPlex’s line of solar products; integrated with a 500mAh battery the Kickr II+ and IV+ are able to provide a constant flow of power even when there are intermittent disruptions in sunlight.

During 2015, we reached an agreement with EVINE Live, one of the premier home shopping networks with TV programming that reaches over 87 million US homes to begin selling EnerPlex products during their broadcasts. EnerPlex launched the Generatr S100 and select other products exclusively with EVINE, EnerPlex also launched the Generatr 1200 launched exclusively with EVINE for a limited period. Also during 2015, EnerPlex expanded its relationship with The Cellular Connection to include over 450 Verizon Wireless Premium Retail Stores; launched its products with two world recognized retailers; The Sports Authority and Cabela’s; and launched its products with GovX; the premier online shopping destination for Military, Law Enforcement and Government agencies. Internationally, EnerPlex products became available in the United Kingdom via the brand’s launch with 172 Maplin’s stores throughout the country.

In 2016, EnerPlex launched the new emergency sales vertical, partnering with Emergency Preparedness eCommerce leader, Emergency Essentials, and we announced new breakthroughs in the Company’s line of high-voltage solar products, designed specifically for high-altitude and space markets. Also during the first quarter of 2016, the Company announced the launch of select products on the GSA Advantage website; allowing Federal employees, including members of all branches of the US Military, to directly purchase Ascent and EnerPlex products including: the MilPak E, Commandr 20, Kickr 4 and WaveSol solar modules.

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 will no longer be producing or selling Enerplex-branded consumer products. Ascent will focus on its photovoltaic business and will supply solar PV products to SPCL, supporting the continuous growth of EnerPlex™ with Ascent’s proprietary and award-winning thin-film solar technologies and products.

During the third quarter of 2017, Ascent Solar was selected by Energizer to develop and supply solar panels for their PowerKeep line of solar products, and in November 2017, Ascent introduced the next generation of our USB-based portable power systems with the XD™ series. The first product to be 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 determines the maximum power the device is able to receive, 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.

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




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Table of Contents

Commercialization and Manufacturing Strategy

Our proprietary manufacturing process deposits multiple layers of materials, including a thin film of highly efficient Copper-Indium-Gallium-diSelenide (“CIGS”) semiconductor material, on a flexible, lightweight, plastic substrate using a roll-to-roll manufacturing process and then laser patterns the layers to create interconnected PV cells, or PV modules, in a process known as monolithic integration. Our monolithic integration techniques enable us to form complete PV modules with less or no costly back end assembly of intercell 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. We believe our technology and manufacturing process, which results in a lighter, flexible module package, provides us with unique market opportunities relative to both the crystalline silicon (“c-Si”) based PV manufacturers that currently lead the PV market, as well as other thin-film PV manufacturers that use substrate materials such as glass, stainless steel or other metals that can be heavier and more rigid than plastics.

Currently, we are producing OEM and consumer oriented products focusing on charging devices powered by our solar modules. Products in these markets are priced based on the overall value proposition rather than a commodity-style price per watt basis. We continue to develop new consumer products and we have adjusted our utilization of our equipment to meet our near term forecast sales. 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.

Related Party Activity
On February 2, 2012, we announced the appointment of Victor Lee as President and Chief Executive Officer. Mr. Lee had served on our Board of Directors since November 2011 and is currently the managing director of Tertius Financial Group Pte Ltd (TFG), an investment firm located in Singapore.
As of June 30, 2018 , TFG owns 333,334 shares of the Company's common stock, which represents less than 2% of the outstanding shares of common stock of the Company as of June 30, 2018 . There are no registration rights relating to these shares.

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 OTC 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.




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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, 2017 . There have been no significant changes to our accounting policies as of June 30, 2018 .

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) . The update will establish a comprehensive revenue recognition standard for virtually all industries in GAAP. ASU 2014-09 will change the amount and timing of revenue and cost recognition, implementation, disclosures and documentation. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date. The amendments in ASU 2015-14 defer the effective date of ASU 2014-09 for all entities by one year. ASU 2014-09 is now effective for the Company in fiscal year 2018. The implementation of ASU 2014-09 did not have a material effect on the Company's consolidated financial statements.
    
In February 2016, the FASB issued ASU No. 2016-02,  Leases (Topic 842) . ASU 2016-02 requires lessees to recognize all leases, including operating leases, on the balance sheet as a lease asset or lease liability, unless the lease is a short-term lease. ASU 2016-02 also requires additional disclosures regarding leasing arrangements. ASU 2016-02 is effective for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. The Company continues to evaluate the impact, that the adoption of this guidance will have on its consolidated financial statements.
    
In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718) . ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for interim periods and fiscal years beginning after December 15, 2017, and early application is permitted. The implementation of ASU 2017-09 did not have a material effect on the Company's consolidated financial statements.

In July 2017, the FASB issued ASU No. 2017-11 Part I, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) . ASU 2017-11 Part I changes the classification analysis of certain equity linked financial instruments with down round features. ASU 2017-11 Part I is effective, for public business entities, for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. The Company is currently evaluating the impact, if any, that the adoption of this guidance will have on its consolidated financial statements.

Results of Operations

Comparison of the Three Months Ended June 30, 2018 and 2017

Revenues. Our net revenues were approximately $103,000 for the three months ended June 30, 2018 , compared to $25,000 for the three months ended June 30, 2017 , an increase of $65,000 . The increase is due to increased sales of our PV products, as well as government contract revenue of approximately $12,000 during the three months ended June 30, 2018 , compared to no government contract revenue during the three months ended June 30, 2017 .

Cost of revenues.  Our Cost of revenues for the three months ended June 30, 2018 was approximately $231,000 , compared to $295,000 for the three months ended June 30, 2017 , a decrease of $64,000 . The decrease is primarily attributed to a decrease in materials and labor costs as a result of a decrease in production as compared to the second quarter in the prior year. Cost of revenues for the second quarter of 2018 is comprised of materials and freight of approximately $44,000 and direct labor and overhead of approximately $186,000 . Management believes our factory is currently significantly under-utilized, and a substantial increase in revenue would result in marginal increases to overhead.



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Research, development and manufacturing operations. Research, development and manufacturing operations costs were approximately $700,000 for the three months ended June 30, 2018 , compared to approximately $1,241,000 for the three months ended June 30, 2017 , a decrease of approximately $541,000 . Research, development and manufacturing operations costs include costs incurred for product development, pre-production and production activities in our manufacturing facility. Research, development and manufacturing operations costs also include costs related to technology development and governmental contracts. The following factors contributed to the decrease in research, development, and manufacturing operations expenses during the three months ended June 30, 2018 :

1.
Personnel and facility related expenses decreased approximately $512,000 , as compared to the second quarter of 2017 . The decrease in personnel and facility related costs was primarily due to a reduction in headcount and the use of contractors.

2.
Materials and equipment related expenses, decreased approximately $29,000 , as compared to the second quarter of 2017 . The decrease was due to a decrease in production of research and development products.

Selling, general and administrative. Selling, general and administrative expenses were approximately $701,000 for the three months ended June 30, 2018 , compared to $1,406,000 for the three months ended June 30, 2017 , a decrease of approximately $705,000 . The following factors contributed to the majority of the decrease in selling, general, and administrative expenses during the three months ended June 30, 2018 :

1.
Personnel and facility related costs decreased approximately $489,000 during the three months ended June 30, 2018 , as compared to the three months ended June 30, 2017 . The overall decrease in personnel related costs was primarily due a lower headcount for the three months ended June 30, 2018 , as compared to the three months ended June 30, 2017 as well as the decreased use of consultants and contractors during the same period.

2.
Marketing and related expenses decreased approximately $16,000 during the three months ended June 30, 2018 , as compared to the three months ended June 30, 2017 . The decrease in Marketing and related expenses is due to reduced marketing, advertising, and promotional activities during the three months ended June 30, 2018 , compared to the second quarter of 2017 , which is the direct result of reducing our marketing budget to focus more on the development of our PV.

3.
Legal expenses increased approximately $52,000 during the three months ended June 30, 2018 , as compared to the three months ended June 30, 2017 . The primary reasons for the increase is due increased and general legal expenses related to financing efforts as compared to the quarter ended June 30, 2017 , offset by decreases in legal expenses related to our patent activity as compared to the second quarter of 2017 .

4.
Public company expenses increased approximately $19,000 during the three months ended June 30, 2018 , as compared to the three months ended June 30, 2017 . The increase is mostly due to a timing difference in our Annual Shareholder Meeting, which was held during the third quarter of 2017, and the fees related to the processing of our reverse stock split.

5.
During the three months ended June 30, 2017 , we also incurred settlement fees of approximately $167,485 , related to the settlements with customers who wished to return Enerplex products following the sale of our Enerplex brand. There were no such fees incurred during the three months ended June 30, 2018 .
Other Expense, net. Other expense was approximately $1,829,000 for the three months ended June 30, 2018 , compared to approximately $1,468,000 for the three months ended June 30, 2017 , an increase of approximately $361,000 . The following factors contributed to the increase in other expense during the three months ended June 30, 2018 :

1.
Interest expense decreased approximately $119,000 , as compared the second quarter of 2017 . The decrease is primarily due to an decrease of non-cash interest expense related to convertible debt, promissory notes, and Preferred Stock.

2.
During the three months ended June 30, 2017 , we recorded conversion inducement transaction costs of $149,000 , related to our Series J Preferred Stock. There were no such transactions during the three months ended June 30, 2018 .

3.
Gains and losses on change in fair value of derivatives and on extinguishment of liabilities, net was a loss of approximately $300,000 during the second quarter of 2018 , as compared to an approximate loss of $929,000 for the second quarter of 2017 . The improvement of approximately $629,000 in this non-cash item is attributable to a gain of approximately $1,225,000 on the change in fair value of our embedded derivative instruments during the three months ended June 30, 2018 , compared to an approximate gain $1,932,000 in 2017 , offset by a reduction in the loss from extinguishment of

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liabilities of approximately $78,000 , related to conversions and redemptions of certain convertible notes and preferred stock, for the three months ended June 30, 2018 , as compared to the three months ended June 30, 2017 .

Net Loss.  Our Net Loss was approximately $3,455,000 for the three months ended June 30, 2018 , compared to a Net Loss of approximately $4,715,000 for the three months ended June 30, 2017 , an improvement of approximately $1,260,000 .
The decrease in Net Loss for the three months ended June 30, 2018 can be summarized in variances in significant account activity as follows:
 
 
 
Decrease (Increase)
to Net Loss
For the Three
Months  Ended
June 30, 2018 Compared to the Three Months Ended
June 30, 2017
Revenues
 
$
78,000

Cost of Revenue
 
64,000

Research, development and manufacturing operations
 
 
Materials and Equipment Related Expenses
 
29,000

Personnel and Facility Related Expenses
 
512,000

Selling, general and administrative expenses
 
 
Personnel, administrative, and facility Related Expenses
 
489,000

Marketing Related Expenses
 
16,000

Legal Expenses
 
52,000

Public Company Costs
 
(19,000
)
Bad debt and Settlement expense
 
167,000

Depreciation and Amortization Expense
 
233,000

Other Income / (Expense)
 
 
Other income
 
150,000

Interest Expense
 
119,000

Non-Cash Change in Fair Value of Derivatives and Gain/Loss on Extinguishment of Liabilities, net
 
(629,000
)
Decrease (Increase) to Net Loss
 
$
1,261,000



Comparison of the Six Months Ended June 30, 2018 and 2017

Revenues. Our net revenues were approximately $481,000 for the six months ended June 30, 2018 , compared to $306,000 for the six months ended June 30, 2017 , an increase of $175,000 . The increase is due to increased sales of our PV products, as well as government contract revenue of approximately $12,000 during the six months ended June 30, 2018 , compared to no government contract revenue during the six months ended June 30, 2017 .

Cost of revenues.  Our Cost of revenues for the six months ended June 30, 2018 was approximately $504,000 , compared to $1,788,000 for the six months ended June 30, 2017 , a decrease of $1,284,000 . The decrease is primarily attributed to a decrease in materials and labor costs as a result of a decrease in production as compared to the same period in the prior year. Cost of revenues for the six months ended June 30, 2018 is comprised of materials and freight of approximately $79,000 and direct labor and and overhead of approximately $424,000 . Management believes our factory is currently significantly under-utilized, and a substantial increase in revenue would result in marginal increases to overhead.
Research, development and manufacturing operations. Research, development and manufacturing operations costs were approximately $1,873,000 for the six months ended June 30, 2018 , compared to approximately $2,518,000 for the six months ended June 30, 2017 , a decrease of approximately $645,000 . Research, development and manufacturing operations costs include costs incurred for product development, pre-production and production activities in our manufacturing facility. Research, development and manufacturing operations costs also include costs related to technology development and governmental contracts. The following factors contributed to the decrease in research, development, and manufacturing operations expenses during the six months ended June 30, 2018 :

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1.
Personnel and facility related expenses decreased approximately $571,000 , as compared to the same time period of 2017. The decrease in personnel and facility related costs was primarily due to a reduction in headcount and the use of contractors.

2.
Materials and equipment related expenses, decreased approximately $74,000 , as compared to the same time period of 2017. The decrease was due to a decrease in production of research and development products.

Inventory impairment costs.  Due to the sale of the EnerPlex brand and the re-purposing of our work-in-process inventory, we are unable to estimate the recoverability of all of our work-in process inventory values, resulting in a lower-cost-to-market analysis and reserve for impairment. An expense of approximately $364,000 was recorded to inventory impairment costs for the six months ended June 30, 2017 .
Selling, general and administrative. Selling, general and administrative expenses were approximately $1,636,000 for the six months ended June 30, 2018 , compared to $3,170,000 for the six months ended June 30, 2017, a decrease of approximately $1,534,000 . The following factors contributed to the decrease in selling, general, and administrative expenses during the six months ended June 30, 2018:

1.
Personnel and facility related costs decreased approximately $1,144,000 during the six months ended June 30, 2018 , as compared to the six months ended June 30, 2017 . The overall decrease in personnel related costs was primarily due a lower headcount for the six months ended June 30, 2018 , as compared to the six months ended June 30, 2017 as well as the decreased use of consultants and contractors during the same period.

2.
Marketing and related expenses decreased approximately $99,000 during the six months ended June 30, 2018 , as compared to the six months ended June 30, 2017 . The decrease in Marketing and related expenses is due to reduced marketing, advertising, and promotional activities during the six months ended June 30, 2018 , compared to the same time period of 2017, which is the direct result of reducing our marketing budget to focus more on the development of our PV.

3.
Legal expenses increased approximately $40,000 during the six months ended June 30, 2018 , as compared to the six months ended June 30, 2017 . The primary reasons for the increase is due increased and general legal expenses related to financing efforts as compared to the six months ended ended June 30, 2017 , offset by decreases in legal expenses related to our patent activity as compared to the same period of 2017.

4.
Public company expenses decreased approximately $119,000 during the six months ended June 30, 2018 , as compared to the six months ended June 30, 2017 . This decrease is primarily due to reduced filing fees related to financing agreements in 2018, as compared to the same period in the previous year.

5.
Bad debt and settlement expenses decreased approximately $212,000 during the six months ended June 30, 2018 , as compared to the six months ended June 30, 2017 . During 2017 we recorded payments and settlements against existing reserves which were offset by additional reserves for customers whose accounts were greater than 120 days overdue. In 2018 we had fewer customers whose accounts were greater than 120 days overdue.
Other Expense, net. Other expense was approximately $4,157,000 for the six months ended June 30, 2018 , compared to approximately $2,058,000 for the six months ended June 30, 2017, an increase of approximately $2,100,000 . The following factors contributed to the increase in other expense during the six months ended June 30, 2018 :

1.
Interest expense decreased approximately $766,000 , as compared the six months ended June 30, 2017 . The decrease is primarily due to an decrease of non-cash interest expense related to convertible debt, promissory notes, and Preferred Stock.

2.
During the six months ended June 30, 2017 , the Company recorded net other income of $579,000 . This income was comprised of a $1,215,000 increase in gain on sale of assets after the transfer of the EnerPlex IP, offset by induced conversion costs of $636,000 on several of the financial instruments. There were no other income or expense transactions during the six months ended June 30, 2018 .

3.
Gains and losses on change in fair value of derivatives and on extinguishment of liabilities, net was a gain of approximately $685,000 during the six months ended June 30, 2018 , as compared to an approximate gain of $1,602,000 for the six months ended June 30, 2017 . The change of approximately $2,287,000 in this non-cash item is attributable to a gain of approximately $674,000 on the change in fair value of our embedded derivative instruments during the six months ended June 30, 2018 , compared to an approximate gain $5,187,000 in 2017, offset by a reduction in the loss from extinguishment

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of liabilities of approximately $2,227,000 , related to conversions and redemptions of certain convertible notes and preferred stock, for the six months ended June 30, 2018 , as compared to the the six months ended June 30, 2017 .

Net Loss.  Our Net Loss was approximately $7,888,000 for the six months ended June 30, 2018 , compared to a Net Loss of approximately $10,294,000 for the six months ended June 30, 2017 , an improvement of approximately $2,406,000 .
The decrease in Net Loss for the three months ended June 30, 2018 can be summarized in variances in significant account activity as follows:
 
 
 
Decrease (Increase)
to Net Loss
For the Six
Months  Ended
June 30, 2018 Compared to the Six Months Ended
June 30, 2017
Revenues
 
$
175,000

Cost of Revenue
 
1,284,000

Research, development and manufacturing operations
 
 
Materials and Equipment Related Expenses
 
74,000

Personnel and Facility Related Expenses
 
571,000

Inventory impairment costs
 
364,000

Selling, general and administrative expenses
 
 
Personnel, administrative, and facility Related Expenses
 
1,144,000

Marketing Related Expenses
 
99,000

Legal Expenses
 
(40,000
)
Public Company Costs
 
119,000

Bad debt and Settlement expense
 
212,000

Depreciation and Amortization Expense
 
504,000

Other Income / (Expense)
 
 
Other income
 
(579,000
)
Interest Expense
 
766,000

Non-Cash Change in Fair Value of Derivatives and Gain/Loss on Extinguishment of Liabilities, net
 
(2,287,000
)
Decrease (Increase) to Net Loss
 
$
2,406,000


Liquidity and Capital Resources
As of June 30, 2018 , we had approximately $26,000 in cash and cash equivalents.

During the six months ended June 30, 2018 and the year ended December 31, 2017 , the Company entered into multiple financing agreements to fund operations. Further discussion of these transactions can be found in Notes 7 through 15, and Note 18 of the financial statements presented as of, and for, the six months ended, June 30, 2018 , and in Notes 8 through 22 and Note 30 of the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 .

We have continued limited PV production at our manufacturing facility. We do not expect sales revenue and cash flows will be sufficient to support operations and cash requirements until we have fully implemented our new consumer products strategy. Changes in the level of expected operating losses, the timing of planned capital expenditures or other factors may negatively impact cash flows and reduce current cash and investments faster than anticipated. During the six months ended June 30, 2018 , we used approximately  $2,181,000  in cash for operations. Our primary significant long term cash obligation consists of a note payable of approximately $5,293,000  to a financial institution secured by a mortgage on its headquarters and manufacturing building in Thornton, Colorado. Total payments of approximately  $347,000 , including principal and interest, will come due in the remainder of 2017.

Additional projected product revenues are not anticipated to result in a positive cash flow position for the year 2018 overall and, as of June 30, 2018 , we have negative working capital. As such, cash liquidity sufficient for the year ending December 31, 2018 will require additional financing.

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The Company continues to accelerate sales efforts related to its PV strategy by focusing on the Company's propriety technology. 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.

Statements of Cash Flows Comparison of the Six Months Ended June 30, 2018 and 2017
For the six months ended June 30, 2018 , our cash used in operations was approximately  $2,181,000  compared to approximately  $6,275,000 for the six months ended June 30, 2017 , a decrease of approximately $4,094,000 . The decrease is primarily due to the reduction of headcount and production, coupled with the transition out of retail consumer electronics markets and the sale of the EnerPlex brand. For the six months ended June 30, 2018 , our cash used in investing activities was approximately $10,000 as compared to our cash provided by investing activities of approximately $125,000 , a decrease of approximately $134,000 . This decrease is the result of investing in intellectual property ("IP") during the first quarter of 2018 and the sales of the EnerPlex brand IP during the first quarter of 2017. During the six months ended June 30, 2018 , negative operating cash flows of approximately  $2,181,000 were funded through $2,127,000 of funding received from promissory notes, and the use of cash customer receivables.

Off Balance Sheet Transactions
As of June 30, 2018 and December 31, 2017 , we did not have any off balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk

Historically, we have purchased manufacturing equipment internationally, which exposes us to foreign currency risk.

From time to time we enter into foreign currency fair value hedges utilizing forward contracts designed to match scheduled contractual payments to equipment suppliers. Our objective is to fix the dollar amount of our foreign currency denominated manufacturing equipment purchases at the time of order. Although our hedging activity is designed to fix the dollar amount to be expended, the asset purchased is recorded at the spot foreign currency rate in effect as of the date of the payment to the supplier. The difference between the spot rate and the forward rate has been reported as gain or loss on forward contract. We cannot accurately predict future exchange rates or the overall impact of future exchange rate fluctuations on our business, results of operations and financial condition. All forward contracts entered into by us have been settled on the contract settlement dates, the last of which was settled in December 2009.
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. As of June 30, 2018 , our cash equivalents consisted only of federally insured operating and savings accounts held with financial institutions. From time to time we hold 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 that a change in interest rates will have a significant impact on our financial position, results of operations or cash flows.





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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are 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 (SEC) rules and forms. Our management, including our Chief Executive Officer and interim Principal Financial Officer, 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 June 30, 2018 . Based on this evaluation, our Chief Executive Officer and interim Principal Financial Officer concluded that as of June 30, 2018 , our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no other changes in internal control over financial reporting during the six months ended June 30, 2018 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

None.

Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in the updated risk factors in our Annual Report on Form 10-K filed on March 29, 2018, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K filed on March 29, 2018 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
Not applicable.

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

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Exhibit No.
 
Description
3.1
 
10.1*
 
10.2*
 
10.3
 
10.4
 
10.5
 
10.6
 
10.7
 
10.8
 
10.9
 
31.1*
 
31.2*
 
32.1*
 
32.2*
 
101.INS
 
XBRL Instance Document
101.SCH
 
XBRL Taxonomy Extension Schema Document
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
*
 
Filed herewith


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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 20th day of August, 2018 .
 
 
ASCENT SOLAR TECHNOLOGIES, INC.
 
 
 
 
By:
/ S / VICTOR LEE
 
 
Lee Kong Hian (aka Victor Lee)
President and Chief Executive Officer
(Principal Executive Officer, Principal Financial Officer, Chief Accounting Officer, and Authorized Signatory)


36

EXHIBIT 10.1

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this “ Agreement ”), dated as of May 8, 2018, is entered into by and between ASCENT SOLAR TECHNOLOGIES, INC., a Delaware corporation (“ Company ”), and ST. GEORGE INVESTMENTS LLC, a Utah limited liability company, its successors and/or assigns (“ Investor ”).
A.    Company and Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the Securities Act of 1933, as amended (the “ 1933 Act ”), and the rules and regulations promulgated thereunder by the United States Securities and Exchange Commission (the “ SEC ”).
B.    Investor desires to purchase and Company desires to issue and sell, upon the terms and conditions set forth in this Agreement, a Secured Convertible Promissory Note, in the form attached hereto as Exhibit A , in the original principal amount of $575,000.00 (the “ Note ”), convertible into shares of common stock, $0.0001 par value per share, of Company (the “ Common Stock ”), upon the terms and subject to the limitations and conditions set forth in such Note.
C.    This Agreement, the Note, the Subordination Agreement (as defined below), the Consent (as defined below), the Trust Deed (as defined below), and all other certificates, documents, agreements, resolutions and instruments delivered to any party under or in connection with this Agreement, as the same may be amended from time to time, are collectively referred to herein as the “ Transaction Documents ”.
D.    For purposes of this Agreement: “ Conversion Shares ” means all shares of Common Stock issuable upon conversion of all or any portion of the Note; and “ Securities ” means the Note and the Conversion Shares.
NOW, THEREFORE , in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Company and Investor hereby agree as follows:
1. Purchase and Sale of Securities .
1.1.      Purchase of Securities . Company shall issue and sell to Investor and Investor agrees to purchase from Company the Note. In consideration thereof, Investor shall pay the Purchase Price (as defined below) to Company as set forth in Section 1.2 below.
1.2.      Form of Payment . The Purchase Price shall be paid by Investor to Company in two (2) tranches. The first tranche of $300,000.00 (the “ Initial Cash Purchase Price ”) shall be paid by Investor to Company on the Closing Date (as defined below) via wire transfer of immediately available funds against delivery of the Note. The second tranche of $200,000.00 shall be paid by Investor to Company via wire transfer of immediately available funds upon the completion of each of the following: (a) the signing of a Subordination Agreement in substantially the form attached hereto as Exhibit B (the “ Subordination Agreement ”) by all applicable parties, (b) the signing of a Consent in substantially the form attached hereto Exhibit C (the “ Consent ”) by the Colorado Housing and Finance Authority (“ CHFA ”), and (c) the recording of the Trust Deed.

1
    


1.3.      Closing Date . Subject to the satisfaction (or written waiver) of the conditions set forth in Section 5 and Section 6 below, the date of the issuance and sale of the Securities pursuant to this Agreement (the “ Closing Date ”) shall be May 8, 2018, or such other mutually agreed upon date. The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall occur on the Closing Date by means of the exchange by email of signed .pdf documents, but shall be deemed for all purposes to have occurred at the offices of Hansen Black Anderson Ashcraft PLLC in Lehi, Utah.
1.4.      Collateral for the Note . The Note shall be secured by that certain Deed of Trust, Assignment of Rents, Trust Deed and Fixture Filing attached hereto as Exhibit D (the “ Trust Deed ”) encumbering certain real property in Adams County, Colorado described therein (the “ Property ”).
1.5.      Original Issue Discount; Transaction Expense Amount . The Note carries an original issue discount of $50,000.00 (the “ OID ”). In addition, Company agrees to pay $25,000.00 to Investor to cover Investor’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of the Securities (the “ Transaction Expense Amount ”). The Transaction Expense Amount will paid by reducing the amount funded to Company. The “ Purchase Price ”, therefore, shall be $500,000.00, computed as follows: $575,000.00 initial principal balance, less the OID.
2.      Investor’s Representations and Warranties . Investor represents and warrants to Company that as of the Closing Date: (i) this Agreement has been duly and validly authorized; (ii) this Agreement constitutes a valid and binding agreement of Investor enforceable in accordance with its terms; (iii) Investor is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D of the 1933 Act; and (iv) this Agreement has been duly executed and delivered on behalf of Investor.
3.      Company’s Representations and Warranties . Company represents and warrants to Investor that as of the Closing Date: (%4) Company is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has the requisite corporate power to own its properties and to carry on its business as now being conducted; (%4) Company is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary; (%4) Company has registered its Common Stock under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “ 1934 Act ”), and is obligated to file reports pursuant to Section 13 or Section 15(d) of the 1934 Act; (%4) each of the Transaction Documents and the transactions contemplated hereby and thereby, have been duly and validly authorized by Company and all necessary actions have been taken; (%4) this Agreement, the Note, the Trust Deed, and the other Transaction Documents have been duly executed and delivered by Company and constitute the valid and binding obligations of Company enforceable in accordance with their terms; (%4) the execution and delivery of the Transaction Documents by Company, the issuance of the Securities in accordance with the terms hereof, and the consummation by Company of the other transactions contemplated by the Transaction Documents do not and will not conflict with or result in a breach by Company of any of the terms or provisions of, or constitute a default under (a) Company’s formation documents or bylaws, each as currently in effect, (b) any indenture, mortgage, deed of trust, or other material agreement or instrument to which Company is a party or by which it or any of its properties or assets are bound, including, without limitation, any listing agreement for the Common Stock, or (c) any existing applicable law, rule, or regulation or any applicable decree, judgment, or order of any court, United States federal, state or foreign regulatory body, administrative agency, or other governmental body having jurisdiction over Company or any of Company’s properties or assets; (%4) no further authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders or any lender of Company is required to be obtained by Company for the issuance of the Securities to Investor or the entering into of the Transaction Documents; (%4) none of Company’s filings with the SEC contained,

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at the time they were filed, any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading; (%4) Company has filed all reports, schedules, forms, statements and other documents required to be filed by Company with the SEC under the 1934 Act on a timely basis or has received a valid extension of such time of filing and has filed any such report, schedule, form, statement or other document prior to the expiration of any such extension; (%4) there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of Company, threatened against or affecting Company before or by any governmental authority or non-governmental department, commission, board, bureau, agency or instrumentality or any other person, wherein an unfavorable decision, ruling or finding would have a material adverse effect on Company or which would adversely affect the validity or enforceability of, or the authority or ability of Company to perform its obligations under, any of the Transaction Documents; (%4) Company has not consummated any financing transaction that has not been disclosed in a periodic filing or current report with the SEC under the 1934 Act; (%4) Company is not, nor has it been at any time in the previous twelve (12) months, a “Shell Company,” as such type of “issuer” is described in Rule 144(i)(1) under the 1933 Act; (%4) with respect to any commissions, placement agent or finder’s fees or similar payments that will or would become due and owing by Company to any person or entity as a result of this Agreement or the transactions contemplated hereby (“ Broker Fees ”), any such Broker Fees will be made in full compliance with all applicable laws and regulations and only to a person or entity that is a registered investment adviser or registered broker-dealer; (%4) Investor shall have no obligation with respect to any Broker Fees or with respect to any claims made by or on behalf of other persons for fees of a type contemplated in this subsection that may be due in connection with the transactions contemplated hereby and Company shall indemnify and hold harmless each of Investor, Investor’s employees, officers, directors, stockholders, members, managers, agents, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorneys’ fees) and expenses suffered in respect of any such claimed Broker Fees; (%4) when issued, the Conversion Shares will be duly authorized, validly issued, fully paid for and non-assessable, free and clear of all liens, claims, charges and encumbrances; (%4) neither Investor nor any of its officers, directors, stockholders, members, managers, employees, agents or representatives has made any representations or warranties to Company or any of its officers, directors, employees, agents or representatives except as expressly set forth in the Transaction Documents and, in making its decision to enter into the transactions contemplated by the Transaction Documents, Company is not relying on any representation, warranty, covenant or promise of Investor or its officers, directors, members, managers, employees, agents or representatives other than as set forth in the Transaction Documents; (%4) Company acknowledges that the State of Utah has a reasonable relationship and sufficient contacts to the transactions contemplated by the Transaction Documents and any dispute that may arise related thereto such that the laws and venue of the State of Utah, as set forth more specifically in Section 10.3 below, shall be applicable to the Transaction Documents and the transactions contemplated therein; (%4) the liens, security interests, and assignments created by the Trust Deed will, when granted and duly filed or recorded, constitute a valid, effective, properly perfected, and enforceable second priority lien on the Property; (%4) Company owns good and marketable fee simple absolute title to the Property, free and clear of all liens, claims and encumbrances other than the first position lien in favor of CHFA, and Borrower is fully authorized to encumber the Property as set forth in this Agreement; and (%4) Company has performed due diligence and background research on Investor and its affiliates including, without limitation, John M. Fife, and, to its satisfaction, has made inquiries with respect to all matters Company may consider relevant to the undertakings and relationships contemplated by the Transaction Documents including, among other things, the following: http://investing.businessweek.com/research/stocks/people/person.asp?personId=7505107&ticker=UAHC; SEC Civil Case No. 07-C-0347 (N.D. Ill.); SEC Civil Action No. 07-CV-347 (N.D. Ill.); and FINRA Case #2011029203701. Company, being aware of the matters described in subsection (xx) above, acknowledges and agrees that such matters, or any similar matters, have no bearing on the transactions contemplated by

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the Transaction Documents and covenants and agrees it will not use any such information as a defense to performance of its obligations under the Transaction Documents or in any attempt to avoid, modify or reduce such obligations.
4.      Company Covenants . Until all of Company’s obligations under all of the Transaction Documents are paid and performed in full, or within the timeframes otherwise specifically set forth below, Company will at all times comply with the following covenants: (%4) so long as Investor beneficially owns any of the Securities and for at least twenty (20) Trading Days (as defined in the Note) thereafter, Company will timely file on the applicable deadline all reports required to be filed with the SEC pursuant to Sections 13 or 15(d) of the 1934 Act, and will take all reasonable action under its control to ensure that adequate current public information with respect to Company, as required in accordance with Rule 144 of the 1933 Act, is publicly available, and will not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would permit such termination; (%4) the Common Stock shall be listed or quoted for trading on any of (a) NYSE, (b) NASDAQ, (c) OTCQX, or (d) OTCQB; (%4) when issued, the Conversion Shares will be duly authorized, validly issued, fully paid for and non-assessable, free and clear of all liens, claims, charges and encumbrances; (%4) trading in Company’s Common Stock will not be suspended, halted, chilled, frozen, reach zero bid or otherwise cease on Company’s principal trading market; (%4) Company shall pay and at all times be current on its obligations to pay all property taxes and assessments, impact fees, park fees, and any other fees and assessments levied against or otherwise related to the Property and any penalties and interest associated with such taxes, whether such taxes are past due or due at a future time, and shall provide proof of such payment to Investor not later than fifteen (15) days prior to the due date for each such payment; (%4) Borrower shall comply with all laws, ordinances, regulations, and rules (federal, state, and local) relating to it, its assets, business, and operations, including without limitation all business operations on the Property and Borrower shall obtain and maintain in full force and effect all approvals and permits and shall comply in all material respects with all conditions and requirements of all approvals and permits affecting or related to the Property and any improvements constructed thereon; (%4) Borrower agrees to fully pay and discharge all claims for labor done and material and services furnished in connection with the construction of improvements, if any, upon the Property and take all other steps to forestall the assertion of claims or liens against the Property or any part thereof or right or interest appurtenant thereto, and in the event any liens are recorded against the Property, Company, at its sole cost and expense, shall cause the same to be removed within ten (10) days of its receipt of notice of any such liens; (%4) for so long as the Note remains outstanding, Company will not, without the prior written consent of Investor: (A) assign, transfer or convey any of its right, title or interest in all or any portion of the Property; or (B) create or suffer to be created any mortgage, pledge, security interest, encumbrance or other lien on all or any portion of the Property (other than to Global Ichiban Limited); (%4) Borrower covenants and agrees that, prior to the Closing, it will obtain all insurance policies required to be carried by Investor (including insurance covering damage to the Property and all improvements thereon as well as commercial liability insurance in an amount not less than $1,000,000 per occurrence) and further agrees to cause Investor to be named as an additional insured of such policies of insurance; (%4) Borrower covenants and agrees to indemnify and hold Investor harmless from and against any and all claims, losses, and expenses (including without limitation all attorneys’ fees) incurred by Investor as a result of or relating in any way to Company’s violation of any environmental laws or any other violations of environmental laws at, on, or with respect to the Property in any way; and (%4) within three (3) Trading Days of Company completing a reverse split of its Common Stock, Company will deliver to Investor a fully executed Irrevocable Letter of Instructions to Transfer Agent (the “ TA Letter ”) substantially in the form attached hereto as Exhibit E acknowledged and agreed to in writing by Company’s transfer agent (the “ Transfer Agent ”).

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5.      Conditions to Company’s Obligation to Sell . The obligation of Company hereunder to issue and sell the Securities to Investor at the Closing is subject to the satisfaction, on or before the Closing Date, of each of the following conditions:
5.1.      Investor shall have executed this Agreement and delivered the same to Company.
5.2.      Investor shall have delivered the Initial Cash Purchase Price to Company in accordance with Section 1.2 above.
6.      Conditions to Investor’s Obligation to Purchase . The obligation of Investor hereunder to purchase the Securities at the Closing is subject to the satisfaction, on or before the Closing Date, of each of the following conditions, provided that these conditions are for Investor’s sole benefit and may be waived by Investor at any time in its sole discretion:
6.1.      Company shall have executed this Agreement and the Note and delivered the same to Investor.
6.2.      Company shall have delivered to Investor a fully executed Officer’s Certificate substantially in the form attached hereto as Exhibit F evidencing Company’s approval of the Transaction Documents.
6.3.      Company shall have delivered to Investor a fully executed Share Issuance Resolution substantially in the form attached hereto as Exhibit G to be delivered to the Transfer Agent.
6.4.      Company shall have delivered to Investor fully executed copies of the Trust Deed and all other Transaction Documents required to be executed by Company herein or therein.
7.      Reservation of Shares . Within three (3) Trading Days of Company completing a reverse split of its Common Stock, Company will reserve a number of shares of Common Stock equal to the greater of (a) 10,000,000 split-adjusted shares of Common stock; and (b) three (3) times the number of shares of Common Stock obtained by dividing the Outstanding Balance (as defined in the Note) as of the date of the request by the Conversion Price (as defined in the Note) (the “ Share Reserve ”). Company further agrees to add additional shares of Common Stock to the Share Reserve in increments of 1,000,000 shares as and when requested by Investor if as of the date of any such request the number of shares being held in the Share Reserve is less than three (3) times the number of shares of Common Stock obtained by dividing the Outstanding Balance (as defined in the Note) as of the date of the request by the Conversion Price. Company shall further require the Transfer Agent to hold the shares of Common Stock reserved pursuant to the Share Reserve exclusively for the benefit of Investor and to issue such shares to Investor promptly upon Investor’s delivery of a conversion notice under the Note. Finally, Company shall require the Transfer Agent to issue shares of Common Stock pursuant to the Note to Investor out of its authorized and unissued shares, and not the Share Reserve, to the extent shares of Common Stock have been authorized, but not issued, and are not included in the Share Reserve. The Transfer Agent shall only issue shares out of the Share Reserve to the extent there are no other authorized shares available for issuance and then only with Investor’s written consent.
8.      Terms of Future Financings . So long as the Note is outstanding, upon any issuance by Company of any security with a conversion formula (including conversion discount and lookback period) that has actually gone into effect that is more favorable to the holder of such security than the conversion formula that was provided to Investor in the Transaction Documents, then Company shall notify Investor of the more favorable conversion formula and such conversion formula, at Investor’s option, shall become a part of the Transaction Documents for the benefit of Investor. Additionally, if Company fails to notify Investor

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of any such more favorable conversion formula, but Investor becomes aware that Company has granted such a conversion formula to any third party, Investor may notify Company of such more favorable conversion formula and such formula shall become a part of the Transaction Documents retroactive to the date on which such term was granted to the applicable third party. For the avoidance of doubt, Company may offer higher original issue discounts, interest rates, warrants and warrant terms, anti-dilution adjustments or other more favorable terms not related to the conversion formula to other investors and Investor shall have no right to such more favorable term or terms. In addition, this Section 8 shall not apply to any more favorable conversion formula contained in an issued security unless and until such more favorable conversion formula has actually gone into effect. If a more favorable conversion formula is contained in a security but does not take effect until some point in the future (for example upon the occurrence of an event of default or some other future event), Investor shall only have rights under this Section 8 after such conversion formula actually goes into effect.
9.      No Shorting . During the period beginning on the Closing Date and ending on the date the Note has been repaid in full or sold by Investor to a third party that is not an affiliate of Investor, Investor will not directly or through an affiliate engage in any open market Short Sales (as defined below) of the Common Stock; provided; however , that unless and until Company has affirmatively demonstrated by the use of specific evidence that Investor is engaging in open market Short Sales, Investor shall be assumed to be in compliance with the provisions of this Section 9 and Company shall remain fully obligated to fulfill all of its obligations under the Transaction Documents; and provided, further, that (i) Company shall under no circumstances be entitled to request or demand that Investor either (A) provide trading or other records of Investor or of any party or (B) affirmatively demonstrate that Investor or any other party has not engaged in any such Short Sales in breach of these provisions as a condition to Company’s fulfillment of its obligations under any of the Transaction Documents, (ii) Company shall not assert Investor’s or any other party’s failure to demonstrate such absence of such Short Sales or provide any trading or other records of Investor or any other party as all or part of a defense to any breach of Company’s obligations under any of the Transaction Documents, and (iii) Company shall have no setoff right with respect to any such Short Sales.  As used herein, “ Short Sale ” has the meaning provided in Rule 3b-3 under the 1934 Act.
10.      Miscellaneous . The provisions set forth in this Section 10 shall apply to this Agreement, as well as all other Transaction Documents as if these terms were fully set forth therein; provided, however, that in the event there is a conflict between any provision set forth in this Section 10 and any provision in any other Transaction Document, the provision in such other Transaction Document shall govern.
10.1.      Certain Capitalized Terms . To the extent any capitalized term used in any Transaction Document is defined in any other Transaction Document (as noted therein), such capitalized term shall remain applicable in the Transaction Document in which it is so used even if the other Transaction Document (wherein such term is defined) has been released, satisfied, or is otherwise cancelled or terminated.
10.2.      Arbitration of Claims . The parties shall submit all Claims (as defined in Exhibit H ) arising under this Agreement or any other Transaction Document or any other agreement between the parties and their affiliates or any Claim relating to the relationship of the parties to binding arbitration pursuant to the arbitration provisions set forth in Exhibit H attached hereto (the “ Arbitration Provisions ”). The parties hereby acknowledge and agree that the Arbitration Provisions are unconditionally binding on the parties hereto and are severable from all other provisions of this Agreement. By executing this Agreement, Company represents, warrants and covenants that Company has reviewed the Arbitration Provisions carefully, consulted with legal counsel about such provisions (or waived its right to do so), understands that the Arbitration Provisions are intended to allow for the expeditious and efficient resolution of any dispute hereunder, agrees to the terms and limitations set forth in the Arbitration Provisions, and that Company will not take a position

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contrary to the foregoing representations. Company acknowledges and agrees that Investor may rely upon the foregoing representations and covenants of Company regarding the Arbitration Provisions.
10.3.      Governing Law; Venue . This Agreement shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Agreement shall be governed by, the internal laws of the State of Utah, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Utah. Each party consents to and expressly agrees that the exclusive venue for arbitration of any dispute arising out of or relating to any Transaction Document or the relationship of the parties or their affiliates shall be in Salt Lake County, Utah. Without modifying the parties’ obligations to resolve disputes hereunder pursuant to the Arbitration Provisions, for any litigation arising in connection with any of the Transaction Documents (and notwithstanding the terms (specifically including any governing law and venue terms) of any transfer agent services agreement or other agreement between the Transfer Agent and Company, such litigation specifically includes, without limitation any action between or involving Company and the Transfer Agent under the TA Letter or otherwise related to Investor in any way (specifically including, without limitation, any action where Company seeks to obtain an injunction, temporary restraining order, or otherwise prohibit the Transfer Agent from issuing shares of Common Stock to Investor for any reason)), each party hereto hereby (i) consents to and expressly submits to the exclusive personal jurisdiction of any state or federal court sitting in Salt Lake County, Utah, (ii) expressly submits to the exclusive venue of any such court for the purposes hereof, (iii) agrees to not bring any such action (specifically including, without limitation, any action where Company seeks to obtain an injunction, temporary restraining order, or otherwise prohibit the Transfer Agent from issuing shares of Common Stock to Investor for any reason) outside of any state or federal court sitting in Salt Lake County, Utah, and (iv) waives any claim of improper venue and any claim or objection that such courts are an inconvenient forum or any other claim, defense or objection to the bringing of any such proceeding in such jurisdiction or to any claim that such venue of the suit, action or proceeding is improper. Finally, Company covenants and agrees to name Investor as a party in interest in, and provide written notice to Investor in accordance with Section 10.13 below prior to bringing or filing, any action (including without limitation any filing or action against any person or entity that is not a party to this Agreement, including without limitation the Transfer Agent) that is related in any way to the Transaction Documents or any transaction contemplated herein or therein, including without limitation any action brought by Company to enjoin or prevent the issuance of any shares of Common Stock to Investor by the Transfer Agent, and further agrees to timely name Investor as a party to any such action. Company acknowledges that the governing law and venue provisions set forth in this Section 10.3 are material terms to induce Investor to enter into the Transaction Documents and that but for Company’s agreements set forth in this Section 10.3 Investor would not have entered into the Transaction Documents.
10.4.      Specific Performance . Company acknowledges and agrees that irreparable damage may occur to Investor in the event that Company fails to perform any material provision of this Agreement or any of the other Transaction Documents in accordance with its specific terms. It is accordingly agreed that Investor shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement or such other Transaction Document and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which the Investor may be entitled under the Transaction Documents, at law or in equity. For the avoidance of doubt, in the event Investor seeks to obtain an injunction against Company or specific performance of any provision of any Transaction Document, such action shall not be a waiver of any right of Investor under any Transaction Document, at law, or in equity, including without limitation its rights to arbitrate any Claim pursuant to the terms of the Transaction Documents.

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10.5.      Calculation Disputes . Notwithstanding the Arbitration Provisions, in the case of a dispute as to any determination or arithmetic calculation under the Transaction Documents, including without limitation, calculating the Outstanding Balance, Conversion Price, Conversion Factor (as defined in the Note), or VWAP (as defined in the Note) (each, a “ Calculation ”), Company or Investor (as the case may be) shall submit any disputed Calculation via email or facsimile with confirmation of receipt (i) within two (2) Trading Days after receipt of the applicable notice giving rise to such dispute to Company or Investor (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after Investor learned of the circumstances giving rise to such dispute. If Investor and Company are unable to agree upon such Calculation within two (2) Trading Days of such disputed Calculation being submitted to Company or Investor (as the case may be), then Investor will promptly submit via email or facsimile the disputed Calculation to Unkar Systems Inc. (“ Unkar Systems ”). Investor shall cause Unkar Systems to perform the Calculation and notify Company and Investor of the results no later than ten (10) Trading Days from the time it receives such disputed Calculation. Unkar Systems’ determination of the disputed Calculation shall be binding upon all parties absent demonstrable error. Unkar Systems’ fee for performing such Calculation shall be paid by the incorrect party, or if both parties are incorrect, by the party whose Calculation is furthest from the correct Calculation as determined by Unkar Systems. In the event Company is the losing party, no extension of the Delivery Date (as defined in the Note) shall be granted and Company shall incur all effects for failing to deliver the applicable shares in a timely manner as set forth in the Transaction Documents. Notwithstanding the foregoing, Investor may, in its sole discretion, designate an independent, reputable investment bank or accounting firm other than Unkar Systems to resolve any such dispute and in such event, all references to “Unkar Systems” herein will be replaced with references to such independent, reputable investment bank or accounting firm so designated by Investor.
10.6.      Counterparts . Each Transaction Document may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another party’s executed counterpart of a Transaction Document (or such party’s signature page thereof) will be deemed to be an executed original thereof.
10.7.      Document Imaging . Investor shall be entitled, in its sole discretion, to image or make copies of all or any selection of the agreements, instruments, documents, and items and records governing, arising from or relating to any of Company’s loans, including, without limitation, this Agreement and the other Transaction Documents, and Investor may destroy or archive the paper originals. The parties hereto (i) waive any right to insist or require that Investor produce paper originals, (ii) agree that such images shall be accorded the same force and effect as the paper originals, (iii) agree that Investor is entitled to use such images in lieu of destroyed or archived originals for any purpose, including as admissible evidence in any demand, presentment or other proceedings, and (iv) further agree that any executed facsimile (faxed), scanned, emailed, or other imaged copy of this Agreement or any other Transaction Document shall be deemed to be of the same force and effect as the original manually executed document.
10.8.      Headings . The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.
10.9.      Severability . In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

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10.10.      Entire Agreement . This Agreement, together with the other Transaction Documents, contains the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither Company nor Investor makes any representation, warranty, covenant or undertaking with respect to such matters. For the avoidance of doubt, all prior term sheets or other documents between Company and Investor, or any affiliate thereof, related to the transactions contemplated by the Transaction Documents (collectively, “ Prior Agreements ”), that may have been entered into between Company and Investor, or any affiliate thereof, are hereby null and void and deemed to be replaced in their entirety by the Transaction Documents. To the extent there is a conflict between any term set forth in any Prior Agreement and the term(s) of the Transaction Documents, the Transaction Documents shall govern.
10.11.      No Reliance . Company acknowledges and agrees that neither Investor nor any of its officers, directors, members, managers, representatives or agents has made any representations or warranties to Company or any of its officers, directors, representatives, agents or employees except as expressly set forth in the Transaction Documents and, in making its decision to enter into the transactions contemplated by the Transaction Documents, Company is not relying on any representation, warranty, covenant or promise of Investor or its officers, directors, members, managers, agents or representatives other than as set forth in the Transaction Documents.
10.12.      Amendments . No provision of this Agreement may be waived or amended other than by an instrument in writing signed by both parties hereto.
10.13.      Notices . Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given on the earliest of: (i) the date delivered, if delivered by personal delivery as against written receipt therefor or by email to an executive officer, or by facsimile (with successful transmission confirmation), (ii) the earlier of the date delivered or the third Trading Day after deposit, postage prepaid, in the United States Postal Service by certified mail, or (iii) the earlier of the date delivered or the third Trading Day after mailing by express courier, with delivery costs and fees prepaid, in each case, addressed to each of the other parties thereunto entitled at the following addresses (or at such other addresses as such party may designate by five (5) calendar days’ advance written notice similarly given to each of the other parties hereto):
If to Company:

Ascent Solar Technologies, Inc.
Attn: Victor Lee
12300 Grant Street
Thornton, Colorado 80241

If to Investor:

St. George Investments LLC
Attn: John Fife
303 East Wacker Drive, Suite 1040
Chicago, Illinois 60601


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With a copy to (which copy shall not constitute notice):

Hansen Black Anderson Ashcraft PLLC
Attn: Jonathan Hansen
3051 West Maple Loop Drive, Suite 325
Lehi, Utah 84043

10.14.      Successors and Assigns . This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by Investor hereunder may be assigned by Investor to a third party, including its affiliates, in whole or in part, without the need to obtain Company’s consent thereto. Company may not assign its rights or obligations under this Agreement or delegate its duties hereunder without the prior written consent of Investor.
10.15.      Survival . The representations and warranties of Company and the agreements and covenants set forth in this Agreement shall survive the Closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of Investor. Company agrees to indemnify and hold harmless Investor and all its officers, directors, employees, attorneys, and agents for loss or damage arising as a result of or related to any breach or alleged breach by Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.
10.16.      Further Assurances . Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
10.17.      Investor’s Rights and Remedies Cumulative; Liquidated Damages . All rights, remedies, and powers conferred in this Agreement and the Transaction Documents are cumulative and not exclusive of any other rights or remedies, and shall be in addition to every other right, power, and remedy that Investor may have, whether specifically granted in this Agreement or any other Transaction Document, or existing at law, in equity, or by statute, and any and all such rights and remedies may be exercised from time to time and as often and in such order as Investor may deem expedient. The parties acknowledge and agree that upon Company’s failure to comply with the provisions of the Transaction Documents, Investor’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates and future share prices, Investor’s increased risk, and the uncertainty of the availability of a suitable substitute investment opportunity for Investor, among other reasons. Accordingly, any fees, charges, and default interest due under the Note and the other Transaction Documents are intended by the parties to be, and shall be deemed, liquidated damages (under Company’s and Investor’s expectations that any such liquidated damages will tack back to the Closing Date for purposes of determining the holding period under Rule 144 under the 1933 Act). The parties agree that such liquidated damages are a reasonable estimate of Investor’s actual damages and not a penalty, and shall not be deemed in any way to limit any other right or remedy Investor may have hereunder, at law or in equity. The parties acknowledge and agree that under the circumstances existing at the time this Agreement is entered into, such liquidated damages are fair and reasonable and are not penalties. All fees, charges, and default interest provided for in the Transaction Documents are agreed to by the parties to be based upon the obligations and the risks assumed by the parties as of the Closing Date and are consistent with investments of this type. The liquidated damages provisions of the Transaction Documents shall not limit or preclude a party from pursuing any other remedy available at law or in equity; provided, however , that the liquidated damages provided for in the Transaction Documents are intended to be in lieu of actual damages.

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10.18.      Ownership Limitation . Notwithstanding anything to the contrary contained in this Agreement or the other Transaction Documents, if at any time Investor would be issued shares of Common Stock under any of the Transaction Documents, but such issuance would cause Investor (together with its affiliates) to beneficially own a number of shares exceeding the Maximum Percentage (as defined in the Note), then Company must not issue to Investor the shares that would cause Investor to exceed the Maximum Percentage. The shares of Common Stock issuable to Investor that would cause the Maximum Percentage to be exceeded are referred to herein as the “ Ownership Limitation Shares ”. Company shall reserve the Ownership Limitation Shares for the exclusive benefit of Investor. From time to time, Investor may notify Company in writing of the number of the Ownership Limitation Shares that may be issued to Investor without causing Investor to exceed the Maximum Percentage. Upon receipt of such notice, Company shall be unconditionally obligated to immediately issue such designated shares to Investor, with a corresponding reduction in the number of the Ownership Limitation Shares. For purposes of this Section, beneficial ownership of Common Stock will be determined under Section 13(d) of the 1934 Act.
10.19.      Attorneys’ Fees and Cost of Collection . In the event of any arbitration or action at law or in equity to enforce or interpret the terms of this Agreement or any of the other Transaction Documents, the parties agree that the party who is awarded the most money (which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any party) shall be deemed the prevailing party for all purposes and shall therefore be entitled to an additional award of the full amount of the attorneys’ fees, deposition costs, and expenses paid by such prevailing party in connection with arbitration or litigation without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair an arbitrator’s or a court’s power to award fees and expenses for frivolous or bad faith pleading. If (i) the Note is placed in the hands of an attorney for collection or enforcement prior to commencing arbitration or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Investor otherwise takes action to collect amounts due under the Note or to enforce the provisions of the Note, or (ii) there occurs any bankruptcy, reorganization, receivership of Company or other proceedings affecting Company’s creditors’ rights and involving a claim under the Note; then Company shall pay the costs incurred by Investor for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees, expenses, deposition costs, and disbursements.
10.20.      Waiver . No waiver of any provision of this Agreement shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.
10.21.      Waiver of Jury Trial . EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY .

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10.22.      Time is of the Essence . Time is expressly made of the essence with respect to each and every provision of this Agreement and the other Transaction Documents.
10.23.      No Changes; Signature Pages . Company, as well as the person signing each Transaction Document on behalf of Company, represents and warrants to Investor that it has not made any changes to this Agreement or any other Transaction Document except those that have been conspicuously disclosed to Investor in a “redline” or similar draft of the applicable Transaction Document, which clearly marks all changes Company has made to the applicable Transaction Document. Moreover, the versions of the Transaction Documents signed by Company are the same versions Investor delivered to Company as being the “final” versions of the Transaction Documents and Company represents and warrants that it has not made any changes to such “final” versions of the Transaction Documents and that the versions Company signed are the same versions Investor delivered to it. In the event Company has made any changes to any Transaction Document that are not conspicuously disclosed to Investor in a “redline” or similar draft of the applicable Transaction Document and that have not been explicitly accepted and agreed upon by Investor, Company acknowledges and agrees that any such changes shall not be considered part of the final document set. Finally, and in furtherance of the foregoing, Company agrees and authorizes Investor to compile the “final” versions of the Transaction Documents, which shall consist of Company’s executed signature pages for all Transaction Documents being applied to the last set of the Transaction Documents that Investor delivered to Company, and Company agrees that such versions of the Transaction Documents that have been collated by Investor shall be deemed to be the final versions of the Transaction Documents for all purposes.
10.24.      Voluntary Agreement . Company has carefully read this Agreement and each of the other Transaction Documents and has asked any questions needed for Company to understand the terms, consequences and binding effect of this Agreement and each of the other Transaction Documents and fully understand them. Company has had the opportunity to seek the advice of an attorney of Company’s choosing, or has waived the right to do so, and is executing this Agreement and each of the other Transaction Documents voluntarily and without any duress or undue influence by Investor or anyone else.
[ Remainder of page intentionally left blank; signature page follows ]

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IN WITNESS WHEREOF, the undersigned Investor and Company have caused this Agreement to be duly executed as of the date first above written.

SUBSCRIPTION AMOUNT :

Principal Amount of Note:    $575,000.00



INVESTOR:

ST. GEORGE INVESTMENTS LLC

By:    Fife Trading, Inc., its Manager


By: /s/John M. Fife
John M. Fife, President



COMPANY:

ASCENT SOLAR TECHNOLOGIES, INC.


By:     /s/Victor Lee
Printed Name: Victor Lee
Title: Chief Executive Officer



[ Signature Page to Securities Purchase Agreement ]



ATTACHED EXHIBITS:

Exhibit A
Note
Exhibit B
Subordination Agreement
Exhibit C
Consent
Exhibit D
Trust Deed
Exhibit E
Irrevocable Transfer Agent Instructions
Exhibit F
Officer’s Certificate
Exhibit G
Share Issuance Resolution
Exhibit H
Arbitration Provisions







EXHIBIT H

ARBITRATION PROVISIONS

Arbitration Provisions , Page 1




1.     Dispute Resolution . For purposes of this Exhibit H , the term “ Claims ” means any disputes, claims, demands, causes of action, requests for injunctive relief, requests for specific performance, liabilities, damages, losses, or controversies whatsoever arising from, related to, or connected with the transactions contemplated in the Transaction Documents and any communications between the parties related thereto, including without limitation any claims of mutual mistake, mistake, fraud, misrepresentation, failure of formation, failure of consideration, promissory estoppel, unconscionability, failure of condition precedent, rescission, and any statutory claims, tort claims, contract claims, or claims to void, invalidate or terminate the Agreement (or these Arbitration Provisions (defined below)) or any of the other Transaction Documents. The term “Claims” specifically excludes a dispute over Calculations and enforcement of Investor’s rights and remedies against the personal property described in the Trust Deed under the applicable provisions of the Uniform Commercial Code. The parties to the Agreement (the “ parties ”) hereby agree that the arbitration provisions set forth in this Exhibit H (“ Arbitration Provisions ”) are binding on each of them. As a result, any attempt to rescind the Agreement (or these Arbitration Provisions) or declare the Agreement (or these Arbitration Provisions) or any other Transaction Document invalid or unenforceable for any reason is subject to these Arbitration Provisions. These Arbitration Provisions shall also survive any termination or expiration of the Agreement. Any capitalized term not defined in these Arbitration Provisions shall have the meaning set forth in the Agreement.
2.     Arbitration . Except as otherwise provided herein, all Claims must be submitted to arbitration (“ Arbitration ”) to be conducted exclusively in Salt Lake County, Utah and pursuant to the terms set forth in these Arbitration Provisions. Subject to the arbitration appeal right provided for in Paragraph 5 below (the “ Appeal Right ”), the parties agree that the award of the arbitrator rendered pursuant to Paragraph 4 below (the “ Arbitration Award ”) shall be (a) final and binding upon the parties, (b) the sole and exclusive remedy between them regarding any Claims, counterclaims, issues, or accountings presented or pleaded to the arbitrator, and (c) promptly payable in United States dollars free of any tax, deduction or offset (with respect to monetary awards). Subject to the Appeal Right, any costs or fees, including without limitation attorneys’ fees, incurred in connection with or incident to enforcing the Arbitration Award shall, to the maximum extent permitted by law, be charged against the party resisting such enforcement. The Arbitration Award shall include default interest (as defined or otherwise provided for in the Note, “ Default Interest ”) (with respect to monetary awards) at the rate specified in the Note for Default Interest both before and after the Arbitration Award. Judgment upon the Arbitration Award will be entered and enforced by any state or federal court sitting in Salt Lake County, Utah.
3.     The Arbitration Act . The parties hereby incorporate herein the provisions and procedures set forth in the Utah Uniform Arbitration Act, U.C.A. § 78B-11-101 et seq. (as amended or superseded from time to time, the “ Arbitration Act ”). Notwithstanding the foregoing, pursuant to, and to the maximum extent permitted by, Section 105 of the Arbitration Act, in the event of conflict or variation between the terms of these Arbitration Provisions and the provisions of the Arbitration Act, the terms of these Arbitration Provisions shall control and the parties hereby waive or otherwise agree to vary the effect of all requirements of the Arbitration Act that may conflict with or vary from these Arbitration Provisions.
4.     Arbitration Proceedings . Arbitration between the parties will be subject to the following:
4.1     Initiation of Arbitration . Pursuant to Section 110 of the Arbitration Act, the parties agree that a party may initiate Arbitration by giving written notice to the other party (“ Arbitration Notice ”) in the same manner that notice is permitted under Section 10.13 of the Agreement; provided, however , that the Arbitration Notice may not be given by email or fax. Arbitration will be deemed initiated as of the date that the Arbitration Notice is deemed delivered to such other party under Section 10.13 of the Agreement (the “ Service Date ”). After the Service Date, information may be delivered, and notices may be given, by email or fax pursuant to Section 10.13 of the Agreement or any other method permitted thereunder. The Arbitration Notice must describe the nature of the controversy, the remedies sought, and the election to commence Arbitration proceedings. All Claims in the Arbitration Notice must be pleaded consistent with the Utah Rules of Civil Procedure.
4.2     Selection and Payment of Arbitrator .
(a) Within ten (10) calendar days after the Service Date, Investor shall select and submit to Company the names of three (3) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com) (such three (3) designated persons hereunder are referred to herein as the “ Proposed Arbitrators ”). For the avoidance of doubt, each Proposed Arbitrator must be qualified as a “neutral” with Utah ADR Services. Within five (5) calendar days after Investor has submitted to Company the names of the Proposed Arbitrators, Company must select, by written notice to Investor, one (1) of the Proposed Arbitrators to act as the arbitrator for the

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parties under these Arbitration Provisions. If Company fails to select one of the Proposed Arbitrators in writing within such 5-day period, then Investor may select the arbitrator from the Proposed Arbitrators by providing written notice of such selection to Company.
(b) If Investor fails to submit to Company the Proposed Arbitrators within ten (10) calendar days after the Service Date pursuant to subparagraph (a) above, then Company may at any time prior to Investor so designating the Proposed Arbitrators, identify the names of three (3) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Service by written notice to Investor. Investor may then, within five (5) calendar days after Company has submitted notice of its Proposed Arbitrators to Investor, select, by written notice to Company, one (1) of the Proposed Arbitrators to act as the arbitrator for the parties under these Arbitration Provisions. If Investor fails to select in writing and within such 5-day period one (1) of the three (3) Proposed Arbitrators selected by Company, then Company may select the arbitrator from its three (3) previously selected Proposed Arbitrators by providing written notice of such selection to Investor.
(c) If a Proposed Arbitrator chosen to serve as arbitrator declines or is otherwise unable to serve as arbitrator, then the party that selected such Proposed Arbitrator may select one (1) of the other three (3) Proposed Arbitrators within three (3) calendar days of the date the chosen Proposed Arbitrator declines or notifies the parties he or she is unable to serve as arbitrator. If all three (3) Proposed Arbitrators decline or are otherwise unable to serve as arbitrator, then the arbitrator selection process shall begin again in accordance with this Paragraph 4.2.
(d) The date that the Proposed Arbitrator selected pursuant to this Paragraph 4.2 agrees in writing (including via email) delivered to both parties to serve as the arbitrator hereunder is referred to herein as the “ Arbitration Commencement Date ”. If an arbitrator resigns or is unable to act during the Arbitration, a replacement arbitrator shall be chosen in accordance with this Paragraph 4.2 to continue the Arbitration. If Utah ADR Services ceases to exist or to provide a list of neutrals and there is no successor thereto, then the arbitrator shall be selected under the then prevailing rules of the American Arbitration Association.
(e) Subject to Paragraph 4.10 below, the cost of the arbitrator must be paid equally by both parties. Subject to Paragraph 4.10 below, if one party refuses or fails to pay its portion of the arbitrator fee, then the other party can advance such unpaid amount (subject to the accrual of Default Interest thereupon), with such amount being added to or subtracted from, as applicable, the Arbitration Award.
4.3     Applicability of Certain Utah Rules . The parties agree that the Arbitration shall be conducted generally in accordance with the Utah Rules of Civil Procedure and the Utah Rules of Evidence. More specifically, the Utah Rules of Civil Procedure shall apply, without limitation, to the filing of any pleadings, motions or memoranda, the conducting of discovery, and the taking of any depositions. The Utah Rules of Evidence shall apply to any hearings, whether telephonic or in person, held by the arbitrator. Notwithstanding the foregoing, it is the parties’ intent that the incorporation of such rules will in no event supersede these Arbitration Provisions. In the event of any conflict between the Utah Rules of Civil Procedure or the Utah Rules of Evidence and these Arbitration Provisions, these Arbitration Provisions shall control.
4.4     Answer and Default . An answer and any counterclaims to the Arbitration Notice shall be required to be delivered to the party initiating the Arbitration within twenty (20) calendar days after the Arbitration Commencement Date. If an answer is not delivered by the required deadline, the arbitrator must provide written notice to the defaulting party stating that the arbitrator will enter a default award against such party if such party does not file an answer within five (5) calendar days of receipt of such notice. If an answer is not filed within the five (5) day extension period, the arbitrator must render a default award, consistent with the relief requested in the Arbitration Notice, against a party that fails to submit an answer within such time period.
4.5     Related Litigation . The party that delivers the Arbitration Notice to the other party shall have the option to also commence concurrent legal proceedings with any state or federal court sitting in Salt Lake County, Utah (“ Litigation Proceedings ”), subject to the following: (a) the complaint in the Litigation Proceedings is to be substantially similar to the claims set forth in the Arbitration Notice, provided that an additional cause of action to compel arbitration will also be included therein, (b) so long as the other party files an answer to the complaint in the Litigation Proceedings and an answer to the Arbitration Notice, the Litigation Proceedings will be stayed pending an Arbitration Award (or Appeal Panel Award (defined below), as applicable) hereunder, (c) if the other party fails to file an answer in the Litigation Proceedings or an answer in the Arbitration proceedings, then the party initiating Arbitration shall be entitled to a default judgment consistent with the relief requested, to be entered in the Litigation Proceedings, and (d) any legal or procedural issue arising under the Arbitration Act that requires a decision of a court of competent jurisdiction may

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be determined in the Litigation Proceedings. Any award of the arbitrator (or of the Appeal Panel (defined below)) may be entered in such Litigation Proceedings pursuant to the Arbitration Act.
4.6     Discovery . Pursuant to Section 118(8) of the Arbitration Act, the parties agree that discovery shall be conducted as follows:
(a) Written discovery will only be allowed if the likely benefits of the proposed written discovery outweigh the burden or expense thereof, and the written discovery sought is likely to reveal information that will satisfy a specific element of a claim or defense already pleaded in the Arbitration. The party seeking written discovery shall always have the burden of showing that all of the standards and limitations set forth in these Arbitration Provisions are satisfied. The scope of discovery in the Arbitration proceedings shall also be limited as follows:
(i)    To facts directly connected with the transactions contemplated by the Agreement.
(ii)    To facts and information that cannot be obtained from another source or in another manner that is more convenient, less burdensome or less expensive than in the manner requested.
(b) No party shall be allowed (i) more than fifteen (15) interrogatories (including discrete subparts), (ii) more than fifteen (15) requests for admission (including discrete subparts), (iii) more than ten (10) document requests (including discrete subparts), or (iv) more than three (3) depositions (excluding expert depositions) for a maximum of seven (7) hours per deposition. The costs associated with depositions will be borne by the party taking the deposition. The party defending the deposition will submit a notice to the party taking the deposition of the estimated attorneys’ fees that such party expects to incur in connection with defending the deposition. If the party defending the deposition fails to submit an estimate of attorneys’ fees within five (5) calendar days of its receipt of a deposition notice, then such party shall be deemed to have waived its right to the estimated attorneys’ fees. The party taking the deposition must pay the party defending the deposition the estimated attorneys’ fees prior to taking the deposition, unless such obligation is deemed to be waived as set forth in the immediately preceding sentence. If the party taking the deposition believes that the estimated attorneys’ fees are unreasonable, such party may submit the issue to the arbitrator for a decision. All depositions will be taken in Utah.
(c) All discovery requests (including document production requests included in deposition notices) must be submitted in writing to the arbitrator and the other party. The party submitting the written discovery requests must include with such discovery requests a detailed explanation of how the proposed discovery requests satisfy the requirements of these Arbitration Provisions and the Utah Rules of Civil Procedure. The receiving party will then be allowed, within five (5) calendar days of receiving the proposed discovery requests, to submit to the arbitrator an estimate of the attorneys’ fees and costs associated with responding to such written discovery requests and a written challenge to each applicable discovery request. After receipt of an estimate of attorneys’ fees and costs and/or challenge(s) to one or more discovery requests, consistent with subparagraph (c) above, the arbitrator will within three (3) calendar days make a finding as to the likely attorneys’ fees and costs associated with responding to the discovery requests and issue an order that (i) requires the requesting party to prepay the attorneys’ fees and costs associated with responding to the discovery requests, and (ii) requires the responding party to respond to the discovery requests as limited by the arbitrator within twenty-five (25) calendar days of the arbitrator’s finding with respect to such discovery requests. If a party entitled to submit an estimate of attorneys’ fees and costs and/or a challenge to discovery requests fails to do so within such 5-day period, the arbitrator will make a finding that (A) there are no attorneys’ fees or costs associated with responding to such discovery requests, and (B) the responding party must respond to such discovery requests (as may be limited by the arbitrator) within twenty-five (25) calendar days of the arbitrator’s finding with respect to such discovery requests. Any party submitting any written discovery requests, including without limitation interrogatories, requests for production subpoenas to a party or a third party, or requests for admissions, must prepay the estimated attorneys’ fees and costs, before the responding party has any obligation to produce or respond to the same, unless such obligation is deemed waived as set forth above.
(d) In order to allow a written discovery request, the arbitrator must find that the discovery request satisfies the standards set forth in these Arbitration Provisions and the Utah Rules of Civil Procedure. The arbitrator must strictly enforce these standards. If a discovery request does not satisfy any of the standards set forth in these Arbitration Provisions or the Utah Rules of Civil Procedure, the arbitrator may modify such discovery request to satisfy the applicable standards, or strike such discovery request in whole or in part.
(e) Each party may submit expert reports (and rebuttals thereto), provided that such reports must be submitted within sixty (60) days of the Arbitration Commencement Date. Each party will be allowed a maximum of two (2) experts. Expert reports must contain the following: (i) a complete statement of all opinions the expert will offer at trial

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and the basis and reasons for them; (ii) the expert’s name and qualifications, including a list of all the expert’s publications within the preceding ten (10) years, and a list of any other cases in which the expert has testified at trial or in a deposition or prepared a report within the preceding ten (10) years; and (iii) the compensation to be paid for the expert’s report and testimony. The parties are entitled to depose any other party’s expert witness one (1) time for no more than four (4) hours. An expert may not testify in a party’s case-in-chief concerning any matter not fairly disclosed in the expert report.
4.6     Dispositive Motions . Each party shall have the right to submit dispositive motions pursuant Rule 12 or Rule 56 of the Utah Rules of Civil Procedure (a “ Dispositive Motion ”). The party submitting the Dispositive Motion may, but is not required to, deliver to the arbitrator and to the other party a memorandum in support (the “ Memorandum in Support ”) of the Dispositive Motion. Within seven (7) calendar days of delivery of the Memorandum in Support, the other party shall deliver to the arbitrator and to the other party a memorandum in opposition to the Memorandum in Support (the “ Memorandum in Opposition ”). Within seven (7) calendar days of delivery of the Memorandum in Opposition, as applicable, the party that submitted the Memorandum in Support shall deliver to the arbitrator and to the other party a reply memorandum to the Memorandum in Opposition (“ Reply Memorandum ”). If the applicable party shall fail to deliver the Memorandum in Opposition as required above, or if the other party fails to deliver the Reply Memorandum as required above, then the applicable party shall lose its right to so deliver the same, and the Dispositive Motion shall proceed regardless.
4.7     Confidentiality . All information disclosed by either party (or such party’s agents) during the Arbitration process (including without limitation information disclosed during the discovery process or any Appeal (defined below)) shall be considered confidential in nature. Each party agrees not to disclose any confidential information received from the other party (or its agents) during the Arbitration process (including without limitation during the discovery process or any Appeal) unless (a) prior to or after the time of disclosure such information becomes public knowledge or part of the public domain, not as a result of any inaction or action of the receiving party or its agents, (b) such information is required by a court order, subpoena or similar legal duress to be disclosed if such receiving party has notified the other party thereof in writing and given it a reasonable opportunity to obtain a protective order from a court of competent jurisdiction prior to disclosure, or (c) such information is disclosed to the receiving party’s agents, representatives and legal counsel on a need to know basis who each agree in writing not to disclose such information to any third party. Pursuant to Section 118(5) of the Arbitration Act, the arbitrator is hereby authorized and directed to issue a protective order to prevent the disclosure of privileged information and confidential information upon the written request of either party.
4.8     Authorization; Timing; Scheduling Order . Subject to all other portions of these Arbitration Provisions, the parties hereby authorize and direct the arbitrator to take such actions and make such rulings as may be necessary to carry out the parties’ intent for the Arbitration proceedings to be efficient and expeditious. Pursuant to Section 120 of the Arbitration Act, the parties hereby agree that an Arbitration Award must be made within one hundred twenty (120) calendar days after the Arbitration Commencement Date. The arbitrator is hereby authorized and directed to hold a scheduling conference within ten (10) calendar days after the Arbitration Commencement Date in order to establish a scheduling order with various binding deadlines for discovery, expert testimony, and the submission of documents by the parties to enable the arbitrator to render a decision prior to the end of such 120-day period.
4.9     Relief . The arbitrator shall have the right to award or include in the Arbitration Award (or in a preliminary ruling) any relief which the arbitrator deems proper under the circumstances, including, without limitation, specific performance and injunctive relief, provided that the arbitrator may not award exemplary or punitive damages.
4.10     Fees and Costs . As part of the Arbitration Award, the arbitrator is hereby directed to require the losing party (the party being awarded the least amount of money by the arbitrator, which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any party) to (a) pay the full amount of any unpaid costs and fees of the Arbitration, and (b) reimburse the prevailing party for all reasonable attorneys’ fees, arbitrator costs and fees, deposition costs, other discovery costs, and other expenses, costs or fees paid or otherwise incurred by the prevailing party in connection with the Arbitration.
5.     Arbitration Appeal .
5.1     Initiation of Appeal. Following the entry of the Arbitration Award, either party (the “ Appellant ”) shall have a period of thirty (30) calendar days in which to notify the other party (the “ Appellee ”), in writing, that the Appellant elects to appeal (the “ Appeal ”) the Arbitration Award (such notice, an “ Appeal Notice ”) to a panel of arbitrators as provided in Paragraph 5.2 below. The date the Appellant delivers an Appeal Notice to the Appellee is referred to herein

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as the “ Appeal Date ”. The Appeal Notice must be delivered to the Appellee in accordance with the provisions of Paragraph 4.1 above with respect to delivery of an Arbitration Notice. In addition, together with delivery of the Appeal Notice to the Appellee, the Appellant must also pay for (and provide proof of such payment to the Appellee together with delivery of the Appeal Notice) a bond in the amount of 110% of the sum the Appellant owes to the Appellee as a result of the Arbitration Award the Appellant is appealing. In the event an Appellant delivers an Appeal Notice to the Appellee (together with proof of payment of the applicable bond) in compliance with the provisions of this Paragraph 5.1, the Appeal will occur as a matter of right and, except as specifically set forth herein, will not be further conditioned. In the event a party does not deliver an Appeal Notice (along with proof of payment of the applicable bond) to the other party within the deadline prescribed in this Paragraph 5.1, such party shall lose its right to appeal the Arbitration Award. If no party delivers an Appeal Notice (along with proof of payment of the applicable bond) to the other party within the deadline described in this Paragraph 5.1, the Arbitration Award shall be final. The parties acknowledge and agree that any Appeal shall be deemed part of the parties’ agreement to arbitrate for purposes of these Arbitration Provisions and the Arbitration Act.
5.2     Selection and Payment of Appeal Panel. In the event an Appellant delivers an Appeal Notice to the Appellee (together with proof of payment of the applicable bond) in compliance with the provisions of Paragraph 5.1 above, the Appeal will be heard by a three (3) person arbitration panel (the “ Appeal Panel ”).
(a)     Within ten (10) calendar days after the Appeal Date, the Appellee shall select and submit to the Appellant the names of five (5) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com) (such five (5) designated persons hereunder are referred to herein as the “ Proposed Appeal Arbitrators ”). For the avoidance of doubt, each Proposed Appeal Arbitrator must be qualified as a “neutral” with Utah ADR Services, and shall not be the arbitrator who rendered the Arbitration Award being appealed (the “ Original Arbitrator ”). Within five (5) calendar days after the Appellee has submitted to the Appellant the names of the Proposed Appeal Arbitrators, the Appellant must select, by written notice to the Appellee, three (3) of the Proposed Appeal Arbitrators to act as the members of the Appeal Panel. If the Appellant fails to select three (3) of the Proposed Appeal Arbitrators in writing within such 5-day period, then the Appellee may select such three (3) arbitrators from the Proposed Appeal Arbitrators by providing written notice of such selection to the Appellant.
(b)     If the Appellee fails to submit to the Appellant the names of the Proposed Appeal Arbitrators within ten (10) calendar days after the Appeal Date pursuant to subparagraph (a) above, then the Appellant may at any time prior to the Appellee so designating the Proposed Appeal Arbitrators, identify the names of five (5) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Service (none of whom may be the Original Arbitrator) by written notice to the Appellee. The Appellee may then, within five (5) calendar days after the Appellant has submitted notice of its selected arbitrators to the Appellee, select, by written notice to the Appellant, three (3) of such selected arbitrators to serve on the Appeal Panel. If the Appellee fails to select in writing within such 5-day period three (3) of the arbitrators selected by the Appellant to serve as the members of the Appeal Panel, then the Appellant may select the three (3) members of the Appeal Panel from the Appellant’s list of five (5) arbitrators by providing written notice of such selection to the Appellee.
(c)     If a selected Proposed Appeal Arbitrator declines or is otherwise unable to serve, then the party that selected such Proposed Appeal Arbitrator may select one (1) of the other five (5) designated Proposed Appeal Arbitrators within three (3) calendar days of the date a chosen Proposed Appeal Arbitrator declines or notifies the parties he or she is unable to serve as an arbitrator. If at least three (3) of the five (5) designated Proposed Appeal Arbitrators decline or are otherwise unable to serve, then the Proposed Appeal Arbitrator selection process shall begin again in accordance with this Paragraph 5.2; provided, however , that any Proposed Appeal Arbitrators who have already agreed to serve shall remain on the Appeal Panel.
(d)    The date that all three (3) Proposed Appeal Arbitrators selected pursuant to this Paragraph 5.2 agree in writing (including via email) delivered to both the Appellant and the Appellee to serve as members of the Appeal Panel hereunder is referred to herein as the “ Appeal Commencement Date ”. No later than five (5) calendar days after the Appeal Commencement Date, the Appellee shall designate in writing (including via email) to the Appellant and the Appeal Panel the name of one (1) of the three (3) members of the Appeal Panel to serve as the lead arbitrator in the Appeal proceedings. Each member of the Appeal Panel shall be deemed an arbitrator for purposes of these Arbitration Provisions and the Arbitration Act, provided that, in conducting the Appeal, the Appeal Panel may only act or make determinations upon the approval or vote of no less than the majority vote of its members, as announced or communicated by the lead arbitrator on the Appeal Panel. If an arbitrator on the Appeal Panel ceases or is unable to act during the Appeal proceedings, a replacement arbitrator shall be chosen in accordance with Paragraph 5.2 above to continue the

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Appeal as a member of the Appeal Panel. If Utah ADR Services ceases to exist or to provide a list of neutrals, then the arbitrators for the Appeal Panel shall be selected under the then prevailing rules of the American Arbitration Association.
(d)     Subject to Paragraph 5.7 below, the cost of the Appeal Panel must be paid entirely by the Appellant.
5.3     Appeal Procedure. The Appeal will be deemed an appeal of the entire Arbitration Award. In conducting the Appeal, the Appeal Panel shall conduct a de novo review of all Claims described or otherwise set forth in the Arbitration Notice. Subject to the foregoing and all other provisions of this Paragraph 5, the Appeal Panel shall conduct the Appeal in a manner the Appeal Panel considers appropriate for a fair and expeditious disposition of the Appeal, may hold one or more hearings and permit oral argument, and may review all previous evidence and discovery, together with all briefs, pleadings and other documents filed with the Original Arbitrator (as well as any documents filed with the Appeal Panel pursuant to Paragraph 5.4(a) below). Notwithstanding the foregoing, in connection with the Appeal, the Appeal Panel shall not permit the parties to conduct any additional discovery or raise any new Claims to be arbitrated, shall not permit new witnesses or affidavits, and shall not base any of its findings or determinations on the Original Arbitrator’s findings or the Arbitration Award.
5.4     Timing.
(a)    Within seven (7) calendar days of the Appeal Commencement Date, the Appellant (i) shall deliver or cause to be delivered to the Appeal Panel copies of the Appeal Notice, all discovery conducted in connection with the Arbitration, and all briefs, pleadings and other documents filed with the Original Arbitrator (which material Appellee shall have the right to review and supplement if necessary), and (ii) may, but is not required to, deliver to the Appeal Panel and to the Appellee a Memorandum in Support of the Appellant’s arguments concerning or position with respect to all Claims, counterclaims, issues, or accountings presented or pleaded in the Arbitration. Within seven (7) calendar days of the Appellant’s delivery of the Memorandum in Support, as applicable, the Appellee shall deliver to the Appeal Panel and to the Appellant a Memorandum in Opposition to the Memorandum in Support. Within seven (7) calendar days of the Appellee’s delivery of the Memorandum in Opposition, as applicable, the Appellant shall deliver to the Appeal Panel and to the Appellee a Reply Memorandum to the Memorandum in Opposition. If the Appellant shall fail to substantially comply with the requirements of clause (i) of this subparagraph (a), the Appellant shall lose its right to appeal the Arbitration Award, and the Arbitration Award shall be final. If the Appellee shall fail to deliver the Memorandum in Opposition as required above, or if the Appellant shall fail to deliver the Reply Memorandum as required above, then the Appellee or the Appellant, as the case may be, shall lose its right to so deliver the same, and the Appeal shall proceed regardless.
(b)     Subject to subparagraph (a) above, the parties hereby agree that the Appeal must be heard by the Appeal Panel within thirty (30) calendar days of the Appeal Commencement Date, and that the Appeal Panel must render its decision within thirty (30) calendar days after the Appeal is heard (and in no event later than sixty (60) calendar days after the Appeal Commencement Date).
5.5     Appeal Panel Award. The Appeal Panel shall issue its decision (the “ Appeal Panel Award ”) through the lead arbitrator on the Appeal Panel. Notwithstanding any other provision contained herein, the Appeal Panel Award shall (a) supersede in its entirety and make of no further force or effect the Arbitration Award (provided that any protective orders issued by the Original Arbitrator shall remain in full force and effect), (b) be final and binding upon the parties, with no further rights of appeal, (c) be the sole and exclusive remedy between the parties regarding any Claims, counterclaims, issues, or accountings presented or pleaded in the Arbitration, and (d) be promptly payable in United States dollars free of any tax, deduction or offset (with respect to monetary awards). Any costs or fees, including without limitation attorneys’ fees, incurred in connection with or incident to enforcing the Appeal Panel Award shall, to the maximum extent permitted by law, be charged against the party resisting such enforcement. The Appeal Panel Award shall include Default Interest (with respect to monetary awards) at the rate specified in the Note for Default Interest both before and after the Arbitration Award. Judgment upon the Appeal Panel Award will be entered and enforced by a state or federal court sitting in Salt Lake County, Utah.
5.6     Relief. The Appeal Panel shall have the right to award or include in the Appeal Panel Award any relief which the Appeal Panel deems proper under the circumstances, including, without limitation, specific performance and injunctive relief, provided that the Appeal Panel may not award exemplary or punitive damages.
5.7     Fees and Costs. As part of the Appeal Panel Award, the Appeal Panel is hereby directed to require the losing party (the party being awarded the least amount of money by the arbitrator, which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any party) to (a) pay the

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full amount of any unpaid costs and fees of the Arbitration and the Appeal Panel, and (b) reimburse the prevailing party (the party being awarded the most amount of money by the Appeal Panel, which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any part) the reasonable attorneys’ fees, arbitrator and Appeal Panel costs and fees, deposition costs, other discovery costs, and other expenses, costs or fees paid or otherwise incurred by the prevailing party in connection with the Arbitration (including without limitation in connection with the Appeal).
6.      Miscellaneous .
6.1     Severability. If any part of these Arbitration Provisions is found to violate or be illegal under applicable law, then such provision shall be modified to the minimum extent necessary to make such provision enforceable under applicable law, and the remainder of the Arbitration Provisions shall remain unaffected and in full force and effect.
6.2     Governing Law . These Arbitration Provisions shall be governed by the laws of the State of Utah without regard to the conflict of laws principles therein.
6.3     Interpretation . The headings of these Arbitration Provisions are for convenience of reference only and shall not form part of, or affect the interpretation of, these Arbitration Provisions.
6.4     Waiver . No waiver of any provision of these Arbitration Provisions shall be effective unless it is in the form of a writing signed by the party granting the waiver.
6.5     Time is of the Essence . Time is expressly made of the essence with respect to each and every provision of these Arbitration Provisions.

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Arbitration Provisions , Page 7


EXHIBIT 10.2

SECURED CONVERTIBLE PROMISSORY NOTE
Effective Date: May 8, 2018    U.S. $575,000.00

FOR VALUE RECEIVED, ASCENT SOLAR TECHNOLOGIES, INC., a Delaware corporation (“ Borrower ”), promises to pay to ST. GEORGE INVESTMENTS LLC, a Utah limited liability company, or its successors or assigns (“ Lender ”), $575,000.00 and any interest, fees, charges, and late fees on the date that is twelve (12) months after the Purchase Price Date (the “ Maturity Date ”) in accordance with the terms set forth herein and to pay interest on the Outstanding Balance at the rate of ten percent (10%) per annum from the Purchase Price Date until the same is paid in full. This Secured Convertible Promissory Note (this “ Note ”) is issued and made effective as of May 8, 2018 (the “ Effective Date ”). This Note is issued pursuant to that certain Securities Purchase Agreement dated May 8, 2018, as the same may be amended from time to time, by and between Borrower and Lender (the “ Purchase Agreement ”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.
This Note carries an OID of $50,000.00. In addition, Borrower agrees to pay $25,000.00 to Lender to cover Lender’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of this Note (the “ Transaction Expense Amount ”), all of which amount is included in the initial principal balance of this Note. The purchase price for this Note shall be $500,000.00 (the “ Purchase Price ”), computed as follows: $575,000.00 original principal balance, less the OID, less the Transaction Expense Amount. The Purchase Price shall be paid by wire transfer of immediately available funds in two (2) tranches. The first tranche in the amount of $300,000.00 shall be due and payable on the date hereof. The second tranche of $200,000 shall only be due and payable upon satisfaction of the condition set forth in Section 1.2 of the Purchase Agreement (the “ Funding Conditions ”). In the event the Funding Conditions are not satisfied by May 23, 2018: (a) the obligation to make the second tranche payment shall terminate, (b) the Outstanding Balance of the Note shall automatically be reduced by $200,000.00 (plus all accrued interest attributable to such $200,000.00 portion), and (c) the Purchase Price Date for this Note shall be deemed to be the date Lender paid the first $300,000.00 tranche to Borrower.
1. Payment; Prepayment .
1.1.      Payment . Provided there is an Outstanding Balance, on each Redemption Date (as defined below), Borrower shall pay to Lender an amount equal to the Redemption Amount (as defined below) due on such Redemption Date in accordance with Section 3. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.
1.2.      Prepayment . Notwithstanding the foregoing, so long as Borrower has not received a Redemption Notice (as defined below) from Lender where the applicable Conversion Shares have not yet been delivered and so long as no Event of Default (as defined below) has occurred since the Effective Date (whether declared by Lender or undeclared and regardless of whether or not cured), then Borrower shall have the right, exercisable on not less than five (5) Trading Days prior written notice to Lender to prepay the Outstanding Balance of this Note, in full, in accordance with this Section 1. Any notice of prepayment

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hereunder (an “ Optional Prepayment Notice ”) shall be delivered to Lender at its registered address and shall state: (i) that Borrower is exercising its right to prepay this Note, and (ii) the date of prepayment, which shall be not less than five (5) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “ Optional Prepayment Date ”), Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of Lender as may be specified by Lender in writing to Borrower. If Borrower exercises its right to prepay this Note, Borrower shall make payment to Lender of an amount in cash equal to 125% (the “ Prepayment Premium ”) multiplied by the then Outstanding Balance of this Note (the “ Optional Prepayment Amount ”). In the event Borrower delivers the Optional Prepayment Amount to Lender prior to the Optional Prepayment Date or without delivering an Optional Prepayment Notice to Lender as set forth herein without Lender’s prior written consent, the Optional Prepayment Amount shall not be deemed to have been paid to Lender until the Optional Prepayment Date. Moreover, in such event the Optional Prepayment Liquidated Damages Amount will automatically be added to the Outstanding Balance of this Note on the day Borrower delivers the Optional Prepayment Amount to Lender. In the event Borrower delivers the Optional Prepayment Amount without an Optional Prepayment Notice, then the Optional Prepayment Date will be deemed to be the date that is five (5) Trading Days from the date that the Optional Prepayment Amount was delivered to Lender and Lender shall be entitled to exercise its conversion rights set forth herein during such five (5) day period. In addition, if Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to Lender within two (2) Trading Days following the Optional Prepayment Date, Borrower shall forever forfeit its right to prepay this Note.
2.      Security . This Note is secured by that certain Trust Deed (as defined in the Purchase Agreement) encumbering certain real property in Adams County, Colorado, all the terms and conditions of which are hereby incorporated into and made a part of this Note.
3.      Borrower Redemptions .
3.1.      Redemption Conversions . Beginning on the date that is six (6) months after the Purchase Price Date, Lender shall have the right, exercisable at any time in its sole and absolute discretion, to redeem all or any portion of the Note (such amount, the “ Redemption Amount ”) by providing Borrower with a notice substantially in the form attached hereto as Exhibit A (each, a “ Redemption Notice ”, and each date on which Lender delivers a Redemption Notice, a “ Redemption Date ”). Payments of each Redemption Amount may be made (a) in cash, or (b) by converting such Redemption Amount into shares of Common Stock (“ Conversion Shares ”) in accordance with this Section 3.1 (each, a “ Conversion ”) per the following formula: the number of Conversion Shares equals the portion of the applicable Redemption Amount being converted divided by the Conversion Price, or (c) by any combination of the foregoing, so long as the cash is delivered to Lender on the third Trading Day immediately following the applicable Redemption Date and the Conversion Shares are delivered to Lender on or before the applicable Delivery Date. Notwithstanding the foregoing, Borrower will not be entitled to elect a Conversion with respect to any portion of any applicable Redemption Amount and shall be required to pay the entire amount of such Redemption Amount in cash, if on the applicable Redemption Date there is an Equity Conditions Failure, and such failure is not waived in writing by Lender. Notwithstanding that failure to repay this Note in full by the Maturity Date is an Event of Default, the Redemption Dates shall continue after the Maturity Date pursuant to this Section 3.1 until the Outstanding Balance is repaid in full.
3.2.      Allocation of Redemption Amounts . Following its receipt of a Redemption Notice, Borrower may either ratify Lender’s proposed allocation in the applicable Redemption Notice or elect to change the allocation by written notice to Lender by email or fax within twenty-four (24) hours of its receipt of such Redemption Notice, so long as the sum of the cash payments and the amount of Conversions equal the

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applicable Redemption Amount. If Borrower fails to notify Lender of its election to change the allocation prior to the deadline set forth in the previous sentence, it shall be deemed to have ratified and accepted the allocation set forth in the applicable Redemption Notice prepared by Lender. Borrower acknowledges and agrees that the amounts and calculations set forth thereon are subject to correction or adjustment because of error, mistake, or any adjustment resulting from an Event of Default or other adjustment permitted under the Transaction Documents (an “ Adjustment ”). Furthermore, no error or mistake in the preparation of such notices, or failure to apply any Adjustment that could have been applied prior to the preparation of a Redemption Notice may be deemed a waiver of Lender’s right to enforce the terms of any Note, even if such error, mistake, or failure to include an Adjustment arises from Lender’s own calculation. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 8 below on or before each applicable Delivery Date. If Borrower elects to pay a Redemption Amount in cash, such payment must be delivered on the second Trading Day immediately following the Redemption Date. If Borrower elects to make a payment in cash and fails to make such payment by the required due date on two (2) separate occasions, Borrower shall lose the right to make payments of Redemption Amounts in cash in the future without Lender’s written consent.
4.      Defaults and Remedies .
4.1.      Defaults . The following are events of default under this Note (each, an “ Event of Default ”): %3. Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; %3. Borrower fails to deliver any Conversion Shares in accordance with the terms hereof; %3. a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; %3. Borrower becomes insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; %3. Borrower makes a general assignment for the benefit of creditors; %3. Borrower files a