10QSB 1 v076176.htm
 
United States
Securities and Exchange Commission
Washington, D.C. 20549

Form 10-QSB

(Mark One)
x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the quarterly period ended March 31, 2007
   
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934
   
  For the transition period from _________  to ________________  
 
 
Commission file number 001-13549  
 
SOLAR THIN FILMS, INC.
(Exact name of small business issuer as specified in its charter)
 
Delaware
  
95-4356228
(State or other jurisdiction of
  
(I.R.S. Employer
incorporation or organization)
  
Identification No.)
           
25 Highland Blvd, Dix Hills, New York 11746
(Address of principal executive offices)
    
(516) 417-8454
Issuer’s telephone number

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes x     No o

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

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:
 

Common Stock, $.01 par value
49,696,101
 (Class)
(Outstanding at May 11, 2007)
 
Transitional Small Business Disclosures Format (Check one): Yes o  No x



SOLAR THIN FILMS, INC.

FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 2007


TABLE OF CONTENTS
 
 
 
  
   
Page
PART I.
 FINANCIAL INFORMATION
  
     
Item 1.
 Financial Statements (Unaudited)
  
     
 
 Condensed Consolidated Balance Sheet as of March 31, 2007
F-1
     
 
 Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income
F-2
 
 for the Three Months Ended March 31, 2007 and 2006
  
     
 
 Condensed Consolidated Statement of Stockholders’ Deficit for the Three Months Ended
F-3
 
 March 31, 2007
F-4
     
 
 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March
F-5
 
 31, 2007 and 2006
  
     
 
 Notes to Unaudited Condensed Consolidated Financial Statements
F-6
     
Item 2.
 Management’s Discussion and Analysis or Plan of Operations
28
     
Item 3.
 Controls and Procedures
32
     
PART II.
 OTHER INFORMATION
  
     
Item 1.
 Legal Proceedings
34
     
Item 2.
 Unregistered Sales of Equity Securities and Use of Proceeds
34
     
Item 3
 Defaults upon Senior Securities
34
     
Item 4.
 Submission of Matters to a Vote of Security Holders
34
     
Item 5.
 Other Information
34
     
Item 6.
 Exhibits
34
     
Signatures
  
36

 
2


PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
SOLAR THIN FILMS, INC
  
CONDENSED CONSOLIDATED BALANCE SHEET
  
March 31, 2007
  
(Unaudited)
  
       
ASSETS
  
Current assets:
      
Cash and cash equivalents
  
$
1,550,048
  
Accounts receivable, net of allowance for doubtful accounts of $-0-
    
423,769
 
Accounts receivable, related party
    
1,470,753
 
Inventory
   
1,113,975
 
Prepaid expenses
    
113,696
 
Advances and other current assets
    
40,624
 
Total current assets
    
4,712,865
 
         
Property, plant and equipment, net of accumulated depreciation of $156,658
    
655,216
 
         
Other assets:
        
Deferred financing costs, net of accumulated amortization of $160,890
    
446,610
 
Other assets
   
9,721
 
Total other assets
    
456,331
 
         
Total assets
  
$
5,824,412
  
         
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
        
Accounts payable and accrued liabilities
 
$
2,825,920
  
Advances received from customers
    
87,757
 
Note payable-other (Note 5)
    
1,500,000
 
Convertible notes payable, current portion, net of unamortized discount (Note 7)
    
525,000
 
Total current liabilities
    
4,938,677
 
         
Convertible notes payable, net of unamortized discount (Note 7)
    
2,049,312
 
Dividends payable
   
145,164
 
Total long term debt
    
2,194,476
 
         
Commitments and contingencies (Note 12)
        
         
Deficiency in Stockholder's Equity
        
Preferred stock, par value $0.01 per share; 1,200,000 shares authorized; -0- issued and outstanding
    
-
 
Series B-1 Preferred stock, par value $0.01 per share, 1,000,000 shares authorized, 228,652 issued and outstanding
    
2,286
 
Series B-3 Preferred stock, par value $0.01 per share, 232,500 shares authorized, 47,518 issued and outstanding
   
475
 
Series B-4 Preferred stock, par value $0.01 per share, 1,000,000 shares authorized, 70,000 issued and outstanding
    
700
 
Common stock, par value $0.01 per share, 150,000,000 shares authorized, 25,196,101 issued and outstanding
   
251,961
 
Additional paid in capital
    
14,360,762
 
Treasury stock, at cost
    
(80,000
)
Accumulated deficit
    
(16,140,908
)
Minority interest (Note 1)
    
-
 
Accumulated other comprehensive income
   
295,983
 
Total deficiency in stockholders' equity
    
(1,308,741
)
         
Total Liabilities and Deficiency in Stockholders' Equity
  
$
5,824,412
  


See accompanying notes to the unaudited condensed consolidated financial statements

F-1


SOLAR THIN FILMS, INC
  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  
AND OTHER COMPREHENSIVE LOSSES
  
(Unaudited)
  
           
   
The three months ended March 31,
 
   
2007
  
2006
  
REVENUE:
  
$
1,902,963
  
$
181,487
  
Cost of sales
    
1,680,130
   
114,054
 
Gross profit
    
222,833
   
67,433
 
               
OPERATING EXPENSES:
              
General, selling and administrative expenses
    
1,380,778
   
330,251
 
Research and development
    
90,000
   
-
 
Depreciation
   
23,084
   
5,338
 
Total operating expenses
    
1,493,862
   
335,589
 
 
              
NET LOSS FROM OPERATIONS
    
(1,271,029
)
  
(268,156
)
               
Other income/(expense)
              
Foreign exchange (expense) gain:
    
(4,932
)
  
2,832
 
Interest expense, net
    
(682,805
)
  
(16,599
)
Debt acquisition costs
    
(49,932
)
  
-
 
Other income/(expense)
    
14,299
   
13,727
 
               
Net loss before provision for income taxes
    
(1,994,399
)
  
(268,196
)
               
Income taxes
   
-
   
-
 
               
Net loss before minority interest
    
(1,994,399
)
  
(268,196
)
               
Minority interest (Note 1)
    
-
   
-
 
               
NET LOSS
  
$
(1,994,399
)
$
(268,196
)
               
Net loss per common share, basic and diluted
    
($0.11
)
  
($0.02
)
               
Weighted average shares outstanding, basic and diluted
    
18,948,601
   
16,035,222
 
               
Comprehensive losses:
              
Net Loss
  
$
(1,994,399
)
$
(268,196
)
Foreign currency transaction gain (loss)
    
26,321
   
(8,275
)
               
Comprehensive Loss
  
$
(1,968,078
)
$
(276,471
)


See accompanying notes to the unaudited condensed consolidated financial statements

F-2

SOLAR THIN FILMS, INC
CONSOLIDATED STATEMENT OF DEFICIENCY OF STOCKHOLDERS' EQUITY
  
Three months ended March 31, 2007
  (Unaudited)
                        
   
Preferred Series B-1
  
Preferred Series B-3
  
Preferred Series B-4
  
Common shares
  
   
Shares
  
Amount
  
Shares
  
Amount
  
Shares
  
Amount
  
Shares
  
Amount
  
Balance at December 31, 2005, as adjusted for Securities Purchase Agreement (Note 1) and reverse stock split (Note 8)
    
-
   
-
   
-
   
-
   
-
   
-
   
16,035,222
 
$
240,400
  
                                                   
Shares issued to Kraft shareholders in exchange for 95.5% of issued and outstanding Kraft shares in connection with Securities Purchase Agreement on June 14, 2006 (Note 1)
    
-
   
-
   
-
   
-
   
95,500
   
955
   
-
   
-
 
                                                   
Reclassification of Kraft equity with Share Exchange Agreement Transfer
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
(240,400
)
                                                   
Minority interest
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
                                                   
Effect of merger with Solar Thin Films, Inc. (formerly American Global United) and assumption of liabilities on June 14, 2006 (Note 1)
    
228,652
   
2,286
   
47,518
   
475
   
-
   
-
   
-
   
160,352
 
                                                   
Common stock issued in September 2006 for services rendered at $2.00 per share (Notes 1 and 8)
    
-
   
-
   
-
   
-
   
-
   
-
   
234,375
   
2,344
 
                                                   
Fair value of 1,890,625 options issued an officer and director
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
                                                   
Fair value of 156,250 options issued to a consultant for services rendered
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
                                                   
Net Income at December 31, 2006
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
                                                   
Balance at December 31, 2006
    
228,652
   
2,286
   
47,518
   
475
   
95,500
   
955
   
16,269,597
    
162,696
  
                                                   
Fractional shares issued upon 1.6 to 1 reverse split on February 9, 2007
    
-
   
-
   
-
   
-
   
-
   
-
   
1,504
    
15
  
                                                   
Settlement of minority interest
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
                                                   
Effect of adoption of EITF 00-19-2 change in accounting principle (Note 1)
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
                                                   
Issuance of 8,925,000 shares of common stock for conversion of 25,500 Preferred B-4 shares
    
-
   
-
   
-
   
-
   
(25,500
)
  
(255
)
  
8,925,000
  
$
89,250
  
                                                   
Foreign currency translation gain
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
  
                                                   
Net loss at March 31, 2007
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
     
228,652
 
$
2,286
    
47,518
 
$
475
    
70,000
 
$
700
    
25,196,101
 
$
251,961
  

See accompanying notes to the unaudited condensed consolidated financial statements
F-3



SOLAR THIN FILMS, INC
  
CONSOLIDATED STATEMENT OF DEFICIENCY OF STOCKHOLDERS' EQUITY
Three months ended March 31, 2007
 (Unaudited)
                           
               
Other
      
Total
  
   
Additional
 
Treasury
  
Minority
  
Comprehensive
  
Accumulated
  
Stockholders'
  
   
Paid in Capital
  
Stock
  
Interest
  
Income (loss)
  
Deficit
  
Deficiency
  
Balance at December 31, 2005, as adjusted for Securities Purchase Agreement (Note 1) and reverse stock split (Note 8)
    
253,781
   
-
   
-
   
31,997
   
(966,983
)
  
(440,805
)
                                       
Shares issued to Kraft shareholders in exchange for 95.5% of issued and outstanding Kraft shares in connection with Securities Purchase Agreement on June 14, 2006 (Note 1)
    
(955
)
  
-
   
-
   
-
   
-
   
-
 
                                       
Reclassification of Kraft equity with Share Exchange Agreement Transfer
    
240,400
   
-
   
-
   
-
   
-
   
-
 
                                       
Effect of merger with Solar Thin Films, Inc. (formerly American Global United) and assumption of liabilities on June 14, 2006 (Note 1)
    
(163,113
)
  
(80,000
)
  
-
   
-
   
(6,681,891
)
  
(6,761,891
)
                                       
Minority interest
    
-
   
-
   
(43,916
)
  
-
   
-
   
(43,916
)
                                       
Common stock issued in September 2006 for services rendered at $2.00 per share (Notes 1 and 8)
    
466,406
   
-
   
-
   
-
   
-
   
468,750
 
                                       
Fair value of 1,890,625 options issued an officer and director
    
2,720,228
   
-
   
-
   
-
   
-
   
2,720,228
 
                                       
Fair value of 156,250 options issued to a consultant for services rendered
    
111,125
   
-
   
-
   
-
   
-
   
111,125
 
                                       
Net Income at December 31, 2006
    
-
   
-
   
-
   
237,665
   
2,858,765
   
3,096,430
 
                                       
Balance at December 31, 2006
    
3,627,872
    
(80,000
)
  
(43,916
)
  
269,662
    
(4,790,109
)
  
(850,079
)
                                       
Fractional shares issued upon 1.6 to 1 reverse split on February 9, 2007
    
(15
)
  
-
   
-
   
-
   
-
   
-
 
                                       
Settlement of minority interest
    
-
   
-
   
43,916
   
-
   
-
   
43,916
 
                                       
Effect of adoption of EITF 00-19-2 change in accounting principle (Note 1)
    
10,821,900
    
-
   
-
   
-
   
(9,356,400
)
  
1,465,500
 
                                       
Issuance of 8,925,000 shares of common stock for conversion of 25,500 Preferred B-4 shares
    
(88,995
)
  
-
   
-
   
-
   
-
   
-
 
                                       
Foreign currency translation gain
    
-
    
-
    
-
    
26,321
    
-
    
26,321
  
                                       
Net loss at March 31, 2007
    
-
   
-
   
-
   
-
   
(1,994,399
)
  
(1,994,399
)
   
$
14,360,762
  
$
(80,000
)
  
-
 
$
295,983
  
$
(16,140,908
)
$
(1,308,741
)
 

 
See accompanying notes to the unaudited condensed consolidated financial statements

F-4





SOLAR THIN FILMS, INC
  
CONSOLIDATED STATEMENT OF CASH FLOWS
  
(Unaudited)
  
   
The three months ended March 31
  
   
2007
  
2006
  
CASH FLOWS FROM OPERATING ACTIVITIES:
          
Net Loss
  
$
(1,994,399
)
$
(268,196
)
Adjustments to reconcile net loss to net cash provided by operating activities:
              
Depreciation
    
23,084
   
5,338
 
Amortization of deferred financing costs
    
49,932
   
-
 
Amortization of debt discounts
    
678,264
   
-
 
Loss on disposal of fixed assets
    
-
   
23,366
 
(Increase) decrease in:
              
Accounts receivable
    
(88,752
)
  
(41,632
)
Accounts receivable, related party
    
(590,623
)
  
-
 
Inventory
    
397,264
   
(48,199
)
Prepaid expenses
    
542,021
   
-
 
Advances and other current assets
    
(658
)
  
(187,108
)
Other assets
    
44,219
   
(38,461
)
Increase (decrease) in:
              
Accounts payable and accrued liabilities
    
266,254
   
220,738
 
Advances received from customers
    
(221,755
)
  
317,007
 
Other current liabilities
    
-
   
3,860
 
Net cash used in operations
    
(895,149
)
  
(13,287
)
               
CASH FLOWS FROM INVESTING ACTIVITIES:
              
Acquisition of property, plant and equipment
    
(48,985
)
  
(82,139
)
Net cash used in investing activities:
    
(48,985
)
  
(82,139
)
               
CASH FLOWS FROM FINANCING ACTIVITIES:
              
Cash provided by notes payable, other-net
    
-
   
(20,485
)
Payment of accrued dividend payable
    
(42,150
)
      
Proceeds from notes payable
    
-
   
1,000,000
 
Cash used in notes payable, related party
    
(157,472
)
  
-
 
Net cash provided by (used in) financing activities:
    
(199,622
)
  
979,515
 
               
Effect of currency rate change on cash
    
26,321
   
(8,275
)
               
Net increase (decrease) in cash and cash equivalents
    
(1,117,435
)
  
875,814
 
Cash and cash equivalents at beginning of period
    
2,667,483
   
33,081
 
Cash and cash equivalents at end of period
  
$
1,550,048
  
$
908,895
  
               
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
              
Cash paid during the period for interest
  
$
4,541
  
$
15,724
  
Cash paid during the period for taxes
    
-
   
-
 

 
See accompanying notes to the unaudited condensed consolidated financial statements
F-5
 
SOLAR THIN FILMS, INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
General

The accompanying unaudited condensed consolidated financial statements of Solar Thin Films, formerly known as American United Global Inc., (“The Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Accordingly, the results from operations for the three month period ended March 31, 2007, are not necessarily indicative of the results that may be expected for the year ended December 31, 2007. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated December 31, 2006 financial statements and footnotes thereto included in the Company's SEC Form 10KSB as filed with the SEC on April 17, 2007.

Business and Basis of Presentation

The Company is incorporated under the laws of the State of Delaware, and is in the business of designing, manufacturing and marketing Solar Panel equipment on a world wide basis.

The consolidated financial statements include the accounts of the Company and it’s wholly and majority- owned subsidiaries, Kraft Electronikai Zrt (“Kraft”) and Superior Ventures Corp. All significant intercompany balances and transactions have been eliminated in consolidation.

Merger and Corporate Restructure

On June 14, 2006, the Company entered into a Securities Purchase Agreement (“Agreement” or “Merger”) with Kraft, a company formed under the laws of the country of Hungary. As a result of the Merger, there was a change in control of the public entity. In accordance with SFAS No. 141, Kraft was the acquiring entity. While the transaction is accounted for using the purchase method of accounting, in substance the Agreement is a recapitalization of Kraft's capital structure.

For accounting purposes, the Company accounted for the transaction as a reverse acquisition and Kraft is the surviving entity. The total purchase price and carrying value of net assets acquired was $(6,681,891). The Company did not recognize goodwill or any intangible assets in connection with the transaction. Prior to the Agreement, the Company was an inactive corporation with no significant assets and liabilities.

Effective with the Agreement, 95.5% of previously outstanding shares of its common stock owned by the Kraft’s shareholders were exchanged for an aggregate of 95,500 shares of the Company’s newly issued Series B-4 Preferred Stock (the “Series B-4 Preferred”). The Series B-4 Preferred are each automatically convertible into 350 shares of common stock or an aggregate of 33,425,000 shares of the Company’s common stock. The conversion is subject to the Company increasing its authorized shares of common stock. Under the Agreement, prior to such conversion, each Series B-4 Preferred share will have the voting rights equal to 350 shares of common stock and vote together with the shares of common stock on all matters.

The value of the stock that was issued was the historical cost of the Company's net tangible assets, which did not differ materially from their fair value.

The accompanying financial statements present the historical financial condition, results of operations and cash flows of Kraft, prior to the merger with American United Global.
 
F-6
 SOLAR THIN FILMS, INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The total consideration paid was $(6,681,891) and the significant components of the transaction are as follows:
 
American United Global, Inc.
Summary Statement of Financial Position
At June 14, 2006
  
 
  
  
  
Current Assets:
  
 
  
Cash
  
$
5,258,503
  
Other assets:
      
Deferred loan costs, net of accumulated amortization of $-0-
    
607,500
  
Notes receivable-Kraft
    
1,500,000
  
 
      
Current Liabilities:
      
Note payable - unsecured
    
(1,500,000
)
Accrued interest and other
    
(1,435,200
)
Long Term liabilities:
      
$525,000 Convertible debenture; less unamortized debt discount of $266,935
    
(258,065
)
$1,250,000 Convertible debenture; less unamortized debt discount of $1,140,988
    
(109,012
)
$6,000,000 Convertible debenture; less unamortized debt discount of $6,000,000
    
-0-
  
Warrant liability
    
(10,821,900
)
 
      
Preferred stock: series B-1
    
(2,287
)
Preferred stock: series B-3
    
(475
)
Preferred stock: series B-4
    
(955
)
Treasury stock, at cost
    
80,000
  
 
      
Net liabilities assumed
  
$
(6,681,891
)


The net liabilities assumed is accounted for as a recapitalization of the Company’s capital structure and , accordingly the Company has charged the $ 6,681,891 to accumulated deficit during the year ended December 31, 2006.

Subsequent to the date of the merger, the Company changed its name from American United Global Inc. to Solar Thin Films, Inc.

F-7
 
SOLAR THIN FILMS, INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Change in Accounting Principle for Registration Payment Arrangements.

In December 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position on No. EITF 00-19-2, Accounting for Registration Payment Arrangements (“FSP EITF 00-19-2”). FSP EITF 00-19-2 provides that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement should be separately recognized and measured in accordance with Statement of Financial Accounting Standards (“FAS”) No. 5, Accounting for Contingencies , which provides that loss contingencies should be recognized as liabilities if they are probable and reasonably estimable. Subsequent to the adoption of FSP EITF 00-19-2, any changes in the carrying amount of the contingent liability will result in a gain or loss that will be recognized in the consolidated statement of operations in the period the changes occur. The guidance in FSP EITF 00-19-2 is effective immediately for registration payment arrangements and the financial instruments subject to those arrangements that are entered into or modified subsequent to the date of issuance of FSP EITF 00-19-2. For registration payment arrangements and financial instruments subject to those arrangements that were entered into prior to the issuance of FSP EITF 00-19-2, this guidance is effective for our consolidated financial statements issued for the year beginning January 1, 2007, and interim periods within that year.

On January 1, 2007, the Company adopted the provisions of FSP EITF 00-19-2 to account for the registration payment arrangement associated with our June 2006 financing (see note 7). On February 13, 2007 the Company became effective with their SB-2 and as such management determined that it was not probable that we would have any additional payment obligations under the June 2006 Registration Payment Arrangement; therefore, additional accrual for contingent obligation is required under the provisions of FSP EITF 00-19-2. Accordingly, the warrant liability account was eliminated and the comparative condensed consolidated financial statements of prior periods and as of December 31, 2006 have been adjusted to apply the new method retrospectively. The following financial statement line items for the three months ended March 31, 2007 and 2006 were affected by the change in accounting principle:

Consolidated Statements of Operations

<
 
  
 
  
 
  
 
  
 
  
As Computed
  
As Reported
  
 
  
 
  
under
  
under FSP
  
Effect of
  
 
  
EITF 00-19
  
EITF 00-19-2
  
Change
  
Three Months Ended March 31, 2007