10-Q 1 v123881_10q.htm
 
 
United States
Securities and Exchange Commission
Washington, D.C. 20549

Form 10-Q

(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, 2008

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 large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer o
Accelerated filer o
Non-accelerated filer o
(do not check if smaller
reporting company)
Smaller reporting company  x

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, $0.01 par value
57,783,601
(Class)
(Outstanding at August 11, 2008)
 
 
 
SOLAR THIN FILMS, INC.
Form 10-Q
for the Quarter Ended June 30, 2008

TABLE OF CONTENTS
 
 
 
 
Page
PART I.
FINANCIAL INFORMATION
 
 
 
 
 
 
Item 1.
Financial Statements
 
 
 
 
 
 
 
Condensed Consolidated Balance Sheets as of June 30, 2008 (Unaudited) and December 31, 2007
 
3
 
 
 
 
 
Condensed Consolidated Statements of Operations and Other Comprehensive Loss for the Three and Six Months Ended June 30, 2008 and 2007 (Unaudited)
 
4
 
 
 
 
 
Condensed Consolidated Statement of Stockholders’ Deficit for the Six Months Ended June 30, 2008 (Unaudited) and Twelve Months Ended December 31, 2007
 
5
 
 
 
 
 
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2008 and 2007 (Unaudited)
 
7
 
 
 
 
 
Notes to Unaudited Condensed Consolidated Financial Statements
 
8
 
 
 
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Result of Operations
 
28
 
 
 
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
35
 
 
 
 
Item 4T
Controls and Procedures
  
35
       
PART II.
OTHER INFORMATION
 
 
 
 
 
 
Item 1.
Legal Proceedings
 
36
       
Item 1A
Risk Factors 
 
36
       
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
36
 
 
 
 
Item 3
Defaults upon Senior Securities
 
36
 
 
 
 
Item 4.
Submission of Matters to a Vote of Security Holders
 
36
 
 
 
 
Item 5.
Other Information
 
36
 
 
 
 
Item 6.
Exhibits
 
37
 
 
 
 
Signatures
 
 
38
 
- 2 -
 
 
 
SOLAR THIN FILMS, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
 
   
June 30,
  
December 31,
  
ASSETS
  
2008
  
2007
  
Current assets:
  
(unaudited)
      
Cash and cash equivalents
  
$
1,373,301
  
$
4,157,476
  
Accounts receivable, net of allowance for doubtful accounts of $-0-
    
432,498
    
459,574
 
Accounts receivable, related party
   
1,332,822
    
1,456,863
 
Inventory
   
985,926
    
191,715
 
Note receivable
    
250,000
    
-
  
Advances and other current assets
    
228,647
    
169,888
  
Total current assets
    
4,603,194
    
6,435,516
 
               
Property, plant and equipment, net of accumulated depreciation and amortization of $496,444 and $341,896, respectively
   
615,795
    
595,030
 
               
Other assets:
              
Deferred financing costs, net of accumulated amortization of $549,682 and $506,796
    
57,818
    
100,704
 
Investment into CG Solar, at cost
    
1,500,000
    
-
  
Other assets
   
6,873
   
7,682
 
Total other assets
    
1,564,691
   
108,386
 
               
Total assets
  
$
6,783,680
  
$
7,138,932
  
               
LIABILITIES AND STOCKHOLDERS' DEFICIT
              
Current liabilities:
              
Accounts payable and accrued liabilities
 
$
3,144,222
  
$
3,072,799
  
Notes payable, current portion
    
1,645,055
    
-
  
Advances received from customers
    
982,376
    
-
 
Note payable-other
   
1,500,000
    
1,500,000
 
Total current liabilities
    
7,271,653
   
4,572,799
 
               
Convertible notes payable, net of unamortized discount
   
-
    
1,773,746
  
Dividends payable
   
180,404
   
156,522
 
Total long term debt
    
180,404
    
1,930,268
 
               
Commitments and contingencies
             
               
Minority interest
   
1,074,022
    
999,496
  
               
Stockholders’ Deficit
              
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 shares issued and outstanding
    
2,286
   
2,286
 
Series B-3 Preferred stock, par value $0.01 per share, 232,500 shares authorized, 47,518 shares issued and outstanding
   
475
   
475
 
Series B-4 Preferred stock, par value $0.01 per share, 1,000,000 shares authorized, - 0 - shares issued and outstanding, respectively
    
-
   
-
 
Common stock, par value $0.01 per share, 150,000,000 shares authorized, 57,783,601 and 57,012,601 shares issued and outstanding, respectively
   
577,836
    
570,126
 
Common stock to be issued
    
187,586
    
-
  
Additional paid in capital
   
24,091,425
    
22,857,742
 
Treasury stock, at cost
    
(80,000
)
  
(80,000
)
Deferred compensation
   
(58,000
)
  
(79,750
)
Accumulated deficit
    
(27,121,073
)
  
(24,075,554
)
Accumulated other comprehensive income
   
657,066
   
441,044
 
Total stockholders' deficit
    
(1,742,399
)
  
(363,631
)
               
Total Liabilities and Stockholders' Deficit
  
$
6,783,680
  
$
7,138,932
  
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
 
- 3 -
 
SOLAR THIN FILMS, INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
(unaudited)
 
   
Three months ended June 30,
  
Six Months ended June 30,
  
   
2008
  
2007
  
2008
  
2007
  
                   
REVENUE:
  
$
728,093
  
$
1,642,096
  
$
1,016,087
  
$
3,545,059
  
Cost of sales
   
649,336
    
1,267,127
    
905,729
    
2,947,257
  
Gross profit
    
78,757
    
374,969
    
110,358
    
597,802
  
                           
OPERATING EXPENSES:
                          
General, selling and administrative expenses
    
1,170,399
    
950,235
    
2,112,039
    
2,331,013
  
Research and development
    
90,000
    
90,000
    
180,000
    
180,000
  
Depreciation and amortization
    
50,276
    
25,006
    
100,198
    
48,090
  
Total operating expenses
    
1,310,675
    
1,065,241
    
2,392,237
    
2,559,103
  
                           
NET LOSS FROM OPERATIONS
    
(1,231,918
)
  
(690,272
)
  
(2,281,879
)
  
(1,961,301
)
                           
Other income/(expense)
                          
Foreign exchange gain (loss)
    
(70,667
)
  
35,434
    
(29,998
)
  
30,502
  
Interest expense, net
    
(266,955
)
  
(647,400
)
  
(680,166
)
  
(1,330,205
)
Debt acquisition costs
    
(17,323
)
  
(50,486
)
  
(42,886
)
  
(100,418
)
Other income (expense)
    
(92
)
  
(61,646
)
  
2,423
    
(47,347
)
                           
Net loss before provision for income taxes
    
(1,586,955
)
  
(1,414,370
)
  
(3,032,506
)
  
(3,408,769
)
                           
Income taxes
   
-
   
-
    
-
    
-
  
                           
Net loss before minority interest
    
(1,586,955
)
  
(1,414,370
)
  
(3,032,506
)
  
(3,408,769
)
                           
Minority interest
   
(4,926
)
  
-
    
(13,013
)
  
-
  
                           
NET LOSS
   
(1,591,881
)
  
(1,414,370
)
  
(3,045,519
)
  
(3,408,769
)
                           
Foreign currency translation gain
   
108,340
    
34,372
    
216,022
    
60,693
  
                           
Comprehensive Loss
  
$
(1,483,541
)
$
(1,379,998
)
$
(2,829,497
)
$
(3,348,076
)
                           
Net loss per common share (basic and diluted)
   $
(0.03
)
 $
(0.03
)
 $
(0.05
)
 $
(0.11
)
                           
Weighted average shares outstanding (basic and diluted)
    
57,658,370
    
41,921,376
    
57,531,475
    
30,498,449
  

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

- 4 -

SOLAR THIN FILMS, INC
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
TWELVE MONTHS ENDED DECEMBER 31, 2007 AND SIX MONTHS ENDED JUNE 30, 2008
(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, 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
  
Effect of adoption of EITF 00-19-2 change in accounting principle
   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
  
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
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
  
Issuance of 1,575,000 shares of common stock to acquire minority interest in subsidiary at $0.75 per share
    
-
    
-
    
-
    
-
    
-
    
-
    
1,575,000
    
15,750
  
Issuance of 4,029,000 shares of common stock in exchange for convertible notes payable
    
-
    
-
    
-
    
-
    
-
    
-
    
4,029,000
    
40,290
  
Issuance of majority owned subsidiary common stock in exchange for services to be rendered
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
  
Issuance of majority owned subsidiary common stock in exchange for services rendered
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
  
Sale of majority owned subsidiary common stock by subsidiary
    
-
    
--
    
-
    
-
    
-
    
-
    
-
    
-
  
Amortization of deferred compensation
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
  
Foreign currency translation gain
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
  
Net loss, December 31, 2007
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
  
Balance, December 31, 2007
    
228,652
  
$
2,286
    
47,518
  
$
475
    
-
  
$
-
    
57,012,601
  
$
570,126
  
Issuance of 771,000 shares of common stock in exchange for convertible notes payable
    
-
    
-
    
-
    
-
    
-
    
-
    
771,000
    
7,710
  
Fair value of vested portion of employee options issued
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
  
Sale of majority owned subsidiary common stock by subsidiary
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
  
Reduction in equity ownership of majority owned subsidiary
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
  
Common shares to be issued in connection with services rendered
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
  
Amortization of deferred compensation
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
  
Foreign currency translation gain
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
  
Net Loss
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
  
Balance, June 30, 2008
    
228,652
  
$
2,286
    
47,518
  
$
475
    
-
  
$
-
    
57,783,601
  
$
577,836
  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
 
- 5 -
 
SOLAR THIN FILMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
TWELVE MONTHS ENDED DECEMBER 31, 2007 AND SIX MONTHS ENDED JUNE 30, 2008
(unaudited)
 
   
Common shares To be issued
  
Additional Paid in Capital
  
Deferred Compensation
  
Treasury Stock
  
Other Comprehensive Income (loss)
  
Accumulated Deficit
  
Total Stockholders' Deficiency
  
                               
Balance at December 31, 2006
  
$
-
  
$
3,627,872
    
-
  
$
(80,000
)
$
269,662
  
$
(4,790,109
)
$
(806,163
)
Fractional shares issued upon 1.6 to 1 reverse split on February 9, 2007
    
-
    
(15
)
  
-
    
-
    
-
    
-
    
-
  
Effect of adoption of EITF 00-19-2 change in accounting principle
   
-
    
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
    
-
    
356,618
    
-
    
-
    
-
    
-
    
356,618
  
Issuance of 1,575,000 shares of common stock to acquire minority interest in subsidiary at $0.75 per share
    
-
    
1,165,500
    
-
    
-
    
-
    
(1,181,250
)
  
-
  
Issuance of 4,029,000 shares of common stock in exchange for convertible notes payable
    
-
    
3,988,710
    
-
    
-
    
-
    
-
    
4,029,000
  
Issuance of majority owned subsidiary common stock in exchange for services to be rendered
    
-
    
87,000
    
(87,000
)
  
-
    
-
    
-
    
-
  
Issuance of majority owned subsidiary common stock in exchange for services rendered
    
-
    
50,000
    
-
    
-
    
-
    
-
    
50,000
  
Sale of majority owned subsidiary common stock by subsidiary
    
-
    
2,331,810
    
-
    
-
    
-
    
-
    
2,331,810
  
Amortization of deferred compensation
    
-
    
-
    
7,250
    
-
    
-
    
-
    
7,250
  
Foreign currency translation gain
    
-
    
-
    
-
    
-
    
171,382
    
-
    
171,382
  
Net loss, December 31, 2007
    
-
    
-
    
-
    
-
    
-
    
(8,747,795
)
  
(8,747,795
)
Balance, December 31, 2007
  
$
-
  
$
22,857,742
  
$
(79,750
)
$
(80,000
)
$
441,044
  
$
(24,075,554
)
$
(363,631
)
Issuance of 771,000 shares of common stock in exchange for convertible notes payable
    
-
    
763,290
    
-
    
-
    
-
    
-
    
771,000
  
Fair value of vested portion of employee options issued
    
-
    
381,905
    
-
    
-
    
-
    
-
    
381,905
  
Sale of majority owned subsidiary common stock by subsidiary
    
-
    
105,226
    
-
    
-
    
-
    
-
    
105,226
  
Reduction in equity ownership of majority owned subsidiary
    
-
    
(16,738
)
  
-
    
-
    
-
    
-
    
(16,738
)
Common stock to be issued in connection with services rendered
    
187,586
                                  
187,586
  
Amortization of deferred compensation
    
-
    
-
    
21,750
    
-
    
-
    
-
    
21,750
  
Foreign currency translation gain
    
-
    
-
    
-
    
-
    
216,022
    
-
    
216,022
  
Net Loss
    
-
    
-
    
-
    
-
    
-
    
(3,045,519
)
  
(3,045,519
)
Balance, June 30, 2008