10QSB 1 v084500_10qsb.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 June 30, 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
52,983,601
(Class)
(Outstanding at August 10, 2007)

Transitional Small Business Disclosures Format (Check one): Yes o No x


SOLAR THIN FILMS, INC.

TABLE OF CONTENTS

     
Page
PART I.
FINANCIAL INFORMATION
  
 
 
 
  
 
Item 1.
Financial Statements (Unaudited)
    
 
 
  
 
 
Condensed Consolidated Balance Sheet as of June 30, 2007
  
3
 
 
  
 
 
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2007 and 2006
  
4
 
 
  
 
 
Condensed Consolidated Statement of Stockholders’ Deficit for the Six Months Ended June 30, 2007
  
5
 
 
  
 
 
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006
  
7
 
 
  
 
 
Notes to Unaudited Condensed Consolidated Financial Statements
  
8
 
 
  
 
Item 2.
Management’s Discussion and Analysis or Plan of Operations
  
32
 
 
  
 
Item 3.
Controls and Procedures
  
37
 
 
  
 
PART II.
OTHER INFORMATION
  
 
 
 
  
 
Item 1.
Legal Proceedings
  
39
 
    
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
  
39
 
    
 
Item 3
Defaults upon Senior Securities
  
39
 
    
 
Item 4.
Submission of Matters to a Vote of Security Holders
  
39
 
    
 
Item 5.
Other Information
  
39
 
    
 
Item 6.
Exhibits
  
39
 
 
  
 
Signatures
 
  
40

2
 
PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

SOLAR THIN FILMS, INC
CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 2007
(Unaudited)
 
       
ASSETS
  
Current assets:
      
Cash and cash equivalents
  
$
1,836,644
  
Accounts receivable, net of allowance for doubtful accounts of $-0-
    
229,249
 
Accounts receivable, related party
    
1,510,499
 
Inventory
    
638,849
 
Prepaid expenses
    
222,645
 
Advances and other current assets
    
23,559
 
Total current assets
    
4,461,445
 
         
Property, plant and equipment, net of accumulated depreciation of $184,947
    
659,576
 
         
Other assets:
        
Deferred financing costs, net of accumulated amortization of $211,377
    
396,123
 
Other assets
   
9,904
 
Total other assets
    
406,027
 
         
Total assets
  
$
5,527,048
  
         
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
        
Accounts payable and accrued liabilities
  
$
2,771,804
  
Advances received from customers
    
279,161
 
Deferred revenue
    
30,000
 
Note payable-other
   
1,500,000
 
Total current liabilities
    
4,580,965
 
         
Convertible notes payable, net of unamortized discount
   
2,658,165
 
Dividends payable
   
147,896
 
Total long term debt
    
2,806,061
 
         
Commitments and contingencies
       
         
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
 
Common stock, par value $0.01 per share, 150,000,000 shares authorized, 51,408,601 issued and outstanding
   
514,086
 
Additional paid in capital
   
14,928,098
 
Treasury stock, at cost
    
(80,000
)
Accumulated deficit
    
(17,555,278
)
Minority interest
   
-
 
Accumulated other comprehensive income
   
330,355
 
Total deficiency in stockholders' equity
    
(1,839,978
)
         
Total Liabilities and Deficiency in Stockholders' Equity
  
$
5,527,048
  
 
See accompanying notes to the unaudited condensed consolidated financial statements
 
3


SOLAR THIN FILMS, INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND OTHER COMPREHENSIVE INCOME (LOSSES)
(Unaudited)
 
   
Three months ended June 30,
 
Six months ended June 30,
  
   
2007
  
2006
  
2007
  
2006
  
       
RESTATED
      
RESTATED
  
REVENUE:
  
$
1,642,096
  
$
130,698
  
$
3,545,059
  
$
312,185
  
Cost of revenue
    
1,267,127
   
113,961
   
2,947,257
   
228,015
 
Gross profit
    
374,969
   
16,737
   
597,802
   
84,170
  
                           
OPERATING EXPENSES:
                          
General, selling and administrative expenses
    
950,235
   
192,653
   
2,331,013
   
522,904
 
Research and development
    
90,000
    
-
    
180,000
    
-
  
Depreciation
   
25,006
   
12,410
   
48,090
   
17,748
 
Total operating expenses
    
1,065,241
   
205,063
   
2,559,103
   
540,652
 
                           
LOSS FROM OPERATIONS
    
(690,272
)
  
(188,326
)
  
(1,961,301
)
  
(456,482
)
                           
Other income/(expense)
                          
Foreign exchange (expense) gain:
    
35,434
   
(1,264
)
  
30,502
   
1,568
 
Unrealized gain (loss) relating to adjustment of warrant liability to fair value
    
-
    
1,510,800
   
-
    
1,510,800
 
Interest expense, net
    
(647,400
)
  
(166,950
)
  
(1,330,205
)
  
(183,549
)
Debt acquisition costs
    
(50,486
)
  
(8,877
)
  
(100,418
)
  
(8,877
)
Other income/(expense)
    
(61,646
)
  
-
   
(47,347
)
  
13,727
 
                           
Net income (loss) before provision for income taxes
    
(1,414,370
)
  
1,145,383
    
(3,408,769
)
  
877,187
 
                           
Income taxes
   
-
   
-
   
-
   
-
  
                           
NET INCOME (LOSS)
  
$
(1,414,370
)
$
1,145,383
  
$
(3,408,769
)
$
877,187
  
                           
Other comprehensive income (loss)
    
34,372
   
(36,566
)
  
60,693
   
(44,841
)
                           
COMPREHENSIVE INCOME (LOSS)
  
$
(1,379,998
)
$
1,108,817
  
$
(3,348,076
)
$
832,346
  
                           
Net income (loss) per common share, basic
    
($0.03
)
$
0.07
    
($0.11
)
$
0.05
  
                           
Net income (loss) per common share, diluted
    
($0.03
)
$
0.02
    
($0.11
)
$
0.02
  
                           
Weighted average number of shares outstanding, basic
    
41,921,376
    
16,035,221
   
30,498,449
    
16,035,221
 
                           
Weighted average number of shares outstanding, diluted
    
41,921,376
    
53,985,041
   
30,498,449
    
53,985,041
 

See accompanying notes to the unaudited condensed consolidated financial statements

4


SOLAR THIN FILMS, INC
CONDENSED CONSOLIDATED STATEMENT OF DEFICIENCY OF STOCKHOLDERS' EQUITY
Six months ended June 30, 2007
 
   
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 and reverse stock split
    
-
   
-
   
-
   
-
   
-
   
-
   
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
   
-
   
-
   
-
   
-
   
95,500
   
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
   
228,652
   
2,286
   
47,518
   
475
   
-
   
-
   
-
   
160,352
 
Minority interest
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
Common stock issued in September 2006 for services rendered at $2.00 per share
   
-
   
-
   
-
   
-
   
-
   
-
   
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
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
Foreign currency translation gain
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
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 33,425,000 shares of common stock for conversion of 95,500 Preferred B-4 shares
    
-
   
-
   
-
   
-
   
(95,500
)
  
(955
)
  
33,425,000
    
334,250
  
Issuance of 1,312,500 shares of common stock in exchange for convertible notes payable
    
-
   
-
   
-
   
-
   
-
   
-
   
1,312,500
   
13,125
 
Common stock issued in June 2007 for services rendered at $0.48 per share
   
-
   
-
   
-
   
-
   
-
   
-
   
400,000
   
4,000
 
Fair value of warrants issued in conjunction with settlement of convertible debt
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
Fair value of vested portion of 3,000,000 options issued to an officer
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
Foreign currency translation gain
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
Net loss at June 30, 2007
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
  
     
228,652
 
$
2,286
    
47,518
 
$
475
    
-
 
$
-
    
51,408,601
 
$
514,086
  

See accompanying notes to the unaudited condensed consolidated financial statements

5
 
SOLAR THIN FILMS, INC
CONDENSED CONSOLIDATED STATEMENT OF DEFICIENCY OF STOCKHOLDERS' EQUITY
Six months ended June 30, 2007
 
   
Additional
          
Other
      
Total
  
   
Paid in
 
Treasury
  
Minority
  
Comprehensive
  
Accumulated
  
Stockholders'
  
   
Capital
  
Stock
  
Interest
  
Income
 
Deficit
  
Deficiency
  
Balance at December 31, 2005, as adjusted for Securities Purchase Agreement and reverse stock split
    
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
   
(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
   
(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
   
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
 
Foreign currency translation gain
    
-
   
-
   
-
   
237,665
    
-
   
237,665
 
Net Income at December 31, 2006
    
-
   
-
   
-
   
-
   
2,858,765
   
2,858,765
 
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 33,425,000 shares of common stock for conversion of 95,500 Preferred B-4 shares
    
(333,295
)
  
-
   
-
   
-
   
-
   
-
 
Issuance of 1,312,500 shares of common stock in exchange for convertible notes payable
    
511,875
   
-
   
-
   
-
   
-
   
525,000
 
Common stock issued in June 2007 for services rendered at $0.48 per share
   
188,000
   
-
   
-
   
-
   
-
   
192,000
 
Fair value of warrants issued in conjunction with settlement of convertible debt
    
61,767
   
-
   
-
   
-
   
-
   
61,767
 
Fair value of vested portion of 3,000,000 options issued to an officer
    
49,994
   
-
   
-
   
-
   
-
   
49,994
 
Foreign currency translation gain
    
-
   
-
   
-
   
60,693
   
-
   
60,693
 
Net loss at June 30, 2007
    
-
   
-
   
-
   
-
   
(3,408,769
)
  
(3,408,769
)
   
$
14,928,098
  
$
(80,000
)
$
-
  
$
330,355
  
$
(17,555,278
)
$
(1,859,978
)

See accompanying notes to the unaudited condensed consolidated financial statements

6
 
SOLAR THIN FILMS, INC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 
   
The six months ended June 30
  
   
2007
  
2006
  
       
RESTATED
  
CASH FLOWS FROM OPERATING ACTIVITIES:
          
Net Income (Loss)
  
$
(3,408,769
)
$
877,187
  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
              
Depreciation
    
48,090
   
17,748
 
Amortization of deferred financing costs
    
100,418
   
8,877
 
Amortization of debt discounts
    
1,287,117
   
122,464
 
Unrealized gain on change in fair value of warrant liabilities
    
-
    
(1,510,800
)
Fair value of warrants issued in conjunction with settlement of debenture
    
61,767
   
-
 
Fair value of vested options issued to officer
    
49,993
   
-
 
Loss on disposal of fixed assets
    
-
   
23,366
 
Common stock issued in exchange for services rendered
    
192,000
   
-
 
(Increase) decrease in:
              
Accounts receivable
    
105,768
   
1,380
 
Accounts receivable, related party
    
(630,369
)
  
-
 
Inventory
    
872,390
   
(343,900
)
Prepaid expenses
    
433,072
   
(176,346
)
Advances and other current assets
    
16,407
   
3,443
 
Other assets
    
44,036
   
(7,803
)
Increase (decrease) in:
              
Accounts payable and accrued liabilities
    
212,138
   
267,363
 
Advances received from customers
    
(30,351
)
  
474,167
 
Other current liabilities
    
30,000
   
(2,545
)
Net cash used in operations
    
(616,293
)
  
(245,399
)
               
CASH FLOWS FROM INVESTING ACTIVITIES:
              
Net cash acquired in connection with merger with American United Global
    
-
   
5,258,503
 
Acquisition of property, plant and equipment
    
(78,349
)
  
(347,078
)
Net cash provided by (used in) investing activities:
    
(78,349
)
  
4,911,425
 
               
CASH FLOWS FROM FINANCING ACTIVITIES:
              
Cash provided by notes payable, other-net
    
-
   
979,948
 
Payment of accrued dividend payable
    
(39,418
)
  
-
 
Proceeds from notes payable
    
-
   
-
 
Cash used in notes payable, related party
    
(157,472
)
  
(433
)
Net cash provided by (used in) financing activities:
    
(196,890
)
  
979,515
 
               
Effect of currency rate change on cash
    
60,693
   
(44,841
)
               
Net increase in cash and cash equivalents
    
(830,839
)
  
5,600,700
 
Cash and cash equivalents at beginning of period
    
2,667,483
   
33,081
 
Cash and cash equivalents at end of period
  
$
1,836,644
  
$
5,633,781
  
               
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
              
Cash paid during the period for interest
  
$
2,502
    
-
 
Cash paid during the period for taxes
    
-
   
-
 
 
See accompanying notes to the unaudited condensed consolidated financial statements

7
 
SOLAR THIN FILMS, INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 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. Nonetheless, the results from operations for the three and six months period ended June 30, 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 its wholly and majority-owned subsidiaries, Superior Ventures Corp. and Kraft Elektronikai Zrt. (“Kraft”). 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”). Pursuant to the Certificate of Designation of the Series B-4 Preferred, each share of Series B-4 Preferred is automatically convertible into 350 shares of common stock or an aggregate of 33,425,000 shares of the Company’s common stock. As of June 30, 2007 the Series B-4 Preferred shares have been converted to 33,425,000 shares of the Company’s common stock (See Note 8). 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.
 
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SOLAR THIN FILMS, INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 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