Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - NewHydrogen, Inc. | Financial_Report.xls |
| EX-32.1 - EXHIBIT 32.1 - NewHydrogen, Inc. | ex321.htm |
| EX-31.1 - EXHIBIT 31.1 - NewHydrogen, Inc. | ex311.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, 2013
¨ TRANSITION REPORT UNDER SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER: 000-54819
BIOSOLAR, INC.
(Name of registrant in its charter)
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Nevada
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20-4754291
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.)
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27936 Lost Canyon Road, Suite 202 , Santa Clarita, CA 91387
(Address of principal executive offices) (Zip Code)
Issuer’s telephone Number: (661) 251-0001
Indicate by check mark whether the registrant (1) has filed all reports required 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 xNo 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). 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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares of registrant’s common stock outstanding, as of July 25, 2013 was 7,839,117.
ITEM 1. FINANCIAL STATEMENTS
| BIOSOLAR, INC. (A Development Stage Company) BALANCE SHEETS |
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June 30, 2013
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December 31, 2012
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(Unaudited)
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ASSETS
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CURRENT ASSETS
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Cash
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$ | 123,612 | $ | 42,942 | ||||
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Prepaid expenses
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23,701 | 11,523 | ||||||
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TOTAL CURRENT ASSETS
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147,313 | 54,465 | ||||||
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PROPERTY AND EQUIPMENT
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||||||||
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Machinery and equipment
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78,863 | 78,863 | ||||||
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Computer
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2,928 | 2,928 | ||||||
| 81,791 | 81,791 | |||||||
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Less accumulated depreciation
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(38,894 | ) | (34,793 | ) | ||||
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NET PROPERTY AND EQUIPMENT
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42,897 | 46,998 | ||||||
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OTHER ASSETS
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||||||||
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Patents
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41,745 | 41,290 | ||||||
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Deposit
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770 | 770 | ||||||
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TOTAL OTHER ASSETS
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42,515 | 42,060 | ||||||
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TOTAL ASSETS
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$ | 232,725 | $ | 143,523 | ||||
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LIABILITIES AND SHAREHOLDERS' DEFICIT
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CURRENT LIABILITIES
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Accounts payable
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$ | 9,996 | $ | 9,253 | ||||
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Accrued expenses
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17,638 | 180,594 | ||||||
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Derivative liability
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514,160 | - | ||||||
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Convertible promissory notes less debt discount of $263,406
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131,094 | 54,631 | ||||||
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TOTAL CURRENT LIABILITIES
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672,888 | 244,478 | ||||||
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SHAREHOLDERS' DEFICIT
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Preferred stock, $0.0001 par value;
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10,000,000 authorized common shares
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- | - | ||||||
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Common stock, $0.0001 par value;
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500,000,000 authorized common shares
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7,331,974 and 6,434,413 shares issued and outstanding, respectively
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734 | 644 | ||||||
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Additional paid in capital
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6,010,061 | 5,676,680 | ||||||
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Deficit accumulated during the development stage
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(6,450,958 | ) | (5,778,279 | ) | ||||
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TOTAL SHAREHOLDERS' DECIFIT
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(440,163 | ) | (100,955 | ) | ||||
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TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT
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$ | 232,725 | $ | 143,523 | ||||
The accompanying notes are an integral part of these financial statements
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BIOSOLAR, INC.
(A Development Stage Company) STATEMENTS OF OPERATIONS (Unaudited)
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From Inception
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April 24, 2006
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Three Months Ended
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Six Months Ended
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through
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June 30, 2013
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June 30, 2012
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June 30, 2013
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June 30, 2012
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June 30, 2013
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REVENUE
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$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
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OPERATING EXPENSES
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General and administrative expenses
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137,808 | 176,716 | 320,774 | 452,728 | 5,222,037 | |||||||||||||||
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Research and development
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714 | 3,741 | 2,029 | 37,735 | 816,386 | |||||||||||||||
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Depreciation and amortization
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2,050 | 2,008 | 4,101 | 3,994 | 38,894 | |||||||||||||||
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TOTAL OPERATING EXPENSES
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140,572 | 182,465 | 326,904 | 494,457 | 6,077,317 | |||||||||||||||
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LOSS FROM OPERATIONS BEFORE OTHER INCOME
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(140,572 | ) | (182,465 | ) | (326,904 | ) | (494,457 | ) | (6,077,317 | ) | ||||||||||
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TOTAL OTHER INCOME/(EXPENSES)
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Interest income
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18 | 5 | 19 | 14 | 87,281 | |||||||||||||||
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Penalties
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- | - | - | - | (180 | ) | ||||||||||||||
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Loss on patent impairment
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- | - | - | - | (107,704 | ) | ||||||||||||||
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Gain on settlement of debt
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4,676 | - | 4,676 | - | 4,676 | |||||||||||||||
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Loss on change in derivative liability
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(36,375 | ) | - | (244,117 | ) | - | (244,117 | ) | ||||||||||||
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Interest expense
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(71,202 | ) | - | (106,353 | ) | (190 | ) | (113,597 | ) | |||||||||||
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TOTAL OTHER INCOME/(EXPENSES)
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(102,883 | ) | 5 | (345,775 | ) | (176 | ) | (373,641 | ) | |||||||||||
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NET LOSS
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$ | (243,455 | ) | $ | (182,460 | ) | $ | (672,679 | ) | $ | (494,633 | ) | $ | (6,450,958 | ) | |||||
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BASIC AND DILUTED LOSS PER SHARE
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$ | (0.03 | ) | $ | (0.03 | ) | $ | (0.10 | ) | $ | (0.08 | ) | ||||||||
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WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
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||||||||||||||||||||
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BASIC AND DILUTED
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7,147,263 | 6,110,971 | 6,592,300 | 5,978,707 | ||||||||||||||||
The accompanying notes are an integral part of these financial statements
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BIOSOLAR, INC.
(A Development Stage Company) STATEMENTS OF SHAREHOLDERS' DEFICIT (Unaudited)
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| Deficit | ||||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||
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Additional
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during the | |||||||||||||||||||||||||||
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Preferred Stock
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Common Stock
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Paid-in
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Development | |||||||||||||||||||||||||
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Shares
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Amount
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Shares
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Amount
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Capital
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Stage
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Total
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Balance at December 31, 2012 (Audited)
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- | $ | - | 6,434,413 | $ | 644 | $ | 5,676,680 | $ | (5,778,279 | ) | $ | (100,955 | ) | ||||||||||||||
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Issuance of common shares for cash at a price of $0.22 per share
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- | - | 504,773 | 51 | 110,999 | - | 111,050 | |||||||||||||||||||||
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Issuance of common shares for converted promissory notes
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- | - | 392,788 | 39 | 167,123 | - | 167,162 | |||||||||||||||||||||
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Adjustment of beneficial conversion feature
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- | - | - | - | (20,369 | ) | - | (20,369 | ) | |||||||||||||||||||
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Stock compensation cost
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- | - | - | - | 75,628 | - | 75,628 | |||||||||||||||||||||
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Net loss for the six months ended June 30,2013
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- | - | - | - | - | (672,679 | ) | (672,679 | ) | |||||||||||||||||||
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Balance at June 30, 2013
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- | $ | - | 7,331,974 | $ | 734 | $ | 6,010,061 | $ | (6,450,958 | ) | $ | (440,163 | ) | ||||||||||||||
The accompanying notes are an integral part of these financial statements
| BIOSOLAR, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS (Unaudited) |
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From Inception
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April 24, 2006
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Six Months Ended
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through
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June 30, 2013
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June 30, 2012
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June 30, 2013
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss
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$ | (672,679 | ) | $ | (494,633 | ) | $ | (6,450,958 | ) | |||
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Adjustment to reconcile net loss to net cash
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used in operating activities
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Depreciation expense
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4,101 | 3,994 | 38,894 | |||||||||
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Issuance of stock for services
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- | - | 325,260 | |||||||||
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Stock compensation cost
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75,628 | 180,004 | 783,705 | |||||||||
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Beneficial conversion feature
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(4,584 | ) | - | - | ||||||||
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Loss on patent impairment
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- | - | 107,704 | |||||||||
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Loss on change in derivative liability
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244,117 | - | 244,117 | |||||||||
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Gain on settlement of debt
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(4,676 | ) | - | (4,676 | ) | |||||||
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Debt discount recognized as interest expense
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105,059 | - | 105,059 | |||||||||
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Common stock issued for interest payable
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3,000 | - | 3,000 | |||||||||
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Changes in Assets and Liabilities
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(Increase) Decrease in:
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Prepaid expenses
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(12,178 | ) | 10,514 | (23,701 | ) | |||||||
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Deposits
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- | - | (770 | ) | ||||||||
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Increase (Decrease) in:
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Accounts payable
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743 | 3,538 | 9,996 | |||||||||
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Accrued expenses
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79,044 | 91,372 | 259,638 | |||||||||
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NET CASH USED IN OPERATING ACTIVITIES
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(182,425 | ) | (205,211 | ) | (4,602,732 | ) | ||||||
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Purchase of equipment
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- | (2,583 | ) | (81,791 | ) | |||||||
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Patent expenditures
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(455 | ) | (1,081 | ) | (149,449 | ) | ||||||
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NET CASH USED IN INVESTING ACTIVITIES
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(455 | ) | (3,664 | ) | (231,240 | ) | ||||||
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Proceeds from convertible promissory notes
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152,500 | - | 227,500 | |||||||||
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Proceeds from common stock subcription payable
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- | - | 203,000 | |||||||||
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Proceeds from issuance of common stock, net of issuance cost
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111,050 | 230,615 | 4,527,084 | |||||||||
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NET CASH PROVIDED IN FINANCING ACTIVITIES
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263,550 | 230,615 | 4,957,584 | |||||||||
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NET INCREASE/(DECREASE) IN CASH
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80,670 | 21,740 | 123,612 | |||||||||
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CASH, BEGINNING OF PERIOD
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42,942 | 52,422 | - | |||||||||
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CASH, END OF PERIOD
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$ | 123,612 | $ | 74,162 | $ | 123,612 | ||||||
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
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Interest paid
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$ | - | $ | 190 | $ | 190 | ||||||
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Taxes paid
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$ | - | $ | - | $ | - | ||||||
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SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS
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Common stock issued for prepaid services
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$ | - | $ | - | $ | 5,867 | ||||||
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During the six months ended June 30, 2013, the Company entered into securities purchase agreements in the amount of $242,000 to purchase common stock in exchange
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for accrued salaries. The accrued salaries were reclassified as convertible promissory notes during the period. Also, the Company converted an aggregate of $75,000 convertible
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promissory notes, including accured interest in the amount of $3,000. During the six months ended June 30, 2012, the Company issued 332,602 shares of common stock for
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warrants through a cashless exercise. Also, the Company issued 18,812 shares of common stock for a subscription receivable, of which 17,577 was unsubscribed.
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The accompanying notes are an integral part of these financial statements
6
1. Basis of Presentation
The accompanying unaudited financial statements 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-Q and Rule 10-01 of Regulation S-X. 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 normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. For further information refer to the financial statements and footnotes thereto included in the Company's Form 10-K for the year ended December 31, 2012.
Going Concern
The accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company does not generate significant revenue, and has negative cash flows from operations, which raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusion. The Company has obtained funds from its shareholders since its inception. It is Management's plan to generate additional working capital from investors, and then continue to pursue its business plan and purposes.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Biosolar, Inc. is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
Development Stage Activities and Operations
The Company is in its initial stages of formation and has had no revenues. A development stage activity is one in which all efforts are devoted substantially to establishing a new business and even if planned principal operations have commenced, revenues are insignificant.
Revenue Recognition
The Company will recognize revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. To date, the Company has had no revenues and is in the development stage.
Cash and Cash Equivalent
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Investments
Certificate of Deposits with banking institutions are short-term investments with initial maturities of more than 90 days. The carrying amount of these investments is a reasonable estimate of fair value due to their short-term nature.
Loss per Share Calculations
Loss per Share calculates basic earnings per share and diluted earnings per share. Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company’s diluted loss per share is the same as the basic loss per share for the three months ended June 30, 2013 as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.
Fair Value of Financial Instruments
Fair Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of June 30, 2013, the amounts reported for cash, inventory, prepaid expenses, accounts payable, and accrued expenses, approximate the fair value because of their short maturities.
We adopted ASC Topic 820 (originally issued as SFAS 157, “Fair Value Measurements”) as of January 1, 2008 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.
7
BIOSOLAR, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS-UNAUDITED
JUNE 30, 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
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·
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Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
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·
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Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
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·
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Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
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We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at June 30, 2013:
Fair Value of Financial Instruments
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Total
|
(Level 1)
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(Level 2)
|
(Level 3)
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|||||||||||||
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Assets
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$ | - | $ | - | $ | - | $ | - | ||||||||
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Total assets measured at fair value
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$ | - | $ | - | $ | - | $ | - | ||||||||
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Liabilities
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Derivative Liability
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$ | 514,160 | $ | - | $ | - | $ | 514,160 | ||||||||
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Convertible Promissory Notes, net of discount
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131,094 | - | - | 131,094 | ||||||||||||
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Total liabilities measured at fair value
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$ | 645,254 | $ | - | $ | - | $ | 645,254 | ||||||||
Recently Issued Accounting Pronouncements
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Management reviewed accounting pronouncements issued during the period ended June 30, 2013, and no pronouncements were adopted during the period.
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3.
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CAPITAL STOCK
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During the period the Company increased its common and preferred stock. As of June 30, 2013, the Company’s authorized stock consisted of 500,000,000 shares of common stock, with a par value of $0.0001, and 10,000,000 preferred stock, with a par value of $0.0001.
During the six months ended June 30, 2013, the Company issued 504,773 shares of common stock at a price of $0.22 per share for cash of $111,050. Also, the Company issued 392,788 shares of common stock at prices ranging from $0.13 to $0.39, for conversion of $75,000 in convertible promissory notes, including $3,000 for accrued interest payable.
4. STOCK OPTIONS AND WARRANTS
On June 30, 2013, the Board of Directors of the Company granted non-qualified stock options for 600,000 shares of common stock to its employees, directors and consultants, agreements may provide. Notwithstanding any other provisions of the Option agreement, each Option expires on the date specified in the Option agreement, which date shall not be later than the fifth (5th) anniversary from the grant date of the options. The stock options vest at various times, and are exercisable for a period of five years from the date of grant at an exercise price of $0.40 per share, the market value of the Company’s common stock on the date of grant.
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Risk free interest rate
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0.75% | ||
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Stock volatility factor
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82% | ||
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Weighted average expected option life
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5 years
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||
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Expected dividend yield
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None
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8
BIOSOLAR, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS-UNAUDITED
JUNE 30, 2013
4. STOCK OPTIONS AND WARRANTS
A summary of the Company’s stock option activity and related information follows:
|
June 30, 2013
|
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Weighted
|
||||||||
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Number
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average
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|||||||
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of
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exercise
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|||||||
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Options
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price
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|||||||
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Outstanding, beginning of period
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236,667 | $ | 4.05 | |||||
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Granted
|
600,000 | 0.40 | ||||||
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Exercised
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- | - | ||||||
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Expired
|
- | - | ||||||
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Outstanding, end of period
|
836,667 | $ | 1.43 | |||||
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Exercisable at the end of period
|
386,667 | $ | 2.63 | |||||
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Weighted average fair value of
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||||||||
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options granted during the period
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$ | 0.40 | ||||||
The weighted average remaining contractual life of options outstanding as of June 30, 2013 was as follows:
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Weighted
|
||||||||||||||
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Average
|
||||||||||||||
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Stock
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Stock
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Remaining
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||||||||||||
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Exercisable
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Options
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Options
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Contractual
|
|||||||||||
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Prices
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Outstanding
|
Exercisable
|
Life (years)
|
|||||||||||
| $ | 4.05 | 236,667 | 236,667 | 2.73 | ||||||||||
| $ | 0.40 | 600,000 | 150,000 | 4.67 | ||||||||||
| 836,667 | 386,667 | |||||||||||||
The stock-based compensation expense recognized in the statement of operations during the three months ended June 30, 2013, related to the granting of these options is $75,628.
Warrants
During the three months ended June 30, 2013, the Company granted no warrants. As of June 30, 2013, 245,000 warrants are outstanding.
5. CONVERTIBLE PROMISSORY NOTES
During the year ended December 31, 2012, the Company entered into two Securities Purchase Agreements (the "Purchase Agreements") each providing for the sale by the Company of 8% unsecured Convertible Notes (“the Notes”) in the principal amounts of $42,500, and $32,500 for an aggregate total of $75,000. The Notes mature on July 5, 2013, and August 14, 2013. After one hundred and eighty days (180) the holder converted both notes with an aggregate principal amount of $75,000, plus accrued interest of $3,000 on various dates during the period ended June 30, 2013 into 392,788 shares of common stock at prices ranging from $0.13 to $0.39 per share. The notes were measured at fair value using the Black-Scholes pricing model, and the Company recognized a gain on conversion of $4,676. The Company recorded debt discount of $55,493 related to the conversion feature of the notes, along with derivative liabilities at inception. During the six months ended June 30, 2013, the debt discount was amortized, and recorded as interest expense in the amount of $55,493, resulting in a net debt discount of $0 at June 30, 2013.
During the six months ended June 30, 2013, the Company entered into two Securities Purchase Agreements (the "Purchase Agreements") on March 1, 2013 and March 20, 2013, each providing for the sale by the Company of 10% unsecured Convertible Notes (“the Notes”) in the aggregate principal amount of $100,000, to be advanced in amounts at the lenders discretion. The total principle advances received on the notes as of June 30, 2013 was $35,000. The notes mature one (1) year from the effective date of each advance. The notes are convertible into shares of common stock of the Company at a price equal to a variable conversion price of the lesser of $0.20 per share or fifty percent (50%) of the lowest trading price recorded on any trade day after the effective date. The fair value of the notes has been determined by using the Black-Scholes pricing model with the following weighted average assumptions: no dividend yield, expected volatility ranging from 65.07% to 158.92%, risk-free interest rate ranging from .15% to .16%, and an expected life of less than a year. The Company recorded debt discount of $35,000 related to the conversion feature of the notes, along with derivative liabilities at inception. During the six months ended June 30, 2013, the debt discount was amortized, and recorded as interest expense in the amount of $10,301, resulting in a net debt discount of $24,699 at June 30, 2013.
9
BIOSOLAR, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS-UNAUDITED
JUNE 30, 2013
5. CONVERTIBLE PROMISSORY NOTES (Continued)
On April 5, 2013, the Company received an additional advance of $25,000 on the securities purchase agreement that was entered into on January 18, 2013, for the sale of a 10% convertible promissory note for the aggregate principal amount of $80,000., to be advanced in amounts at the lenders discretion. The total principle advances received on the notes as of June 30, 2013 was $35,000. The notes mature six (6) months from the effective date of each advance. The notes are convertible into shares of common stock of the Company at a price equal to a variable conversion price of the lesser of a) $0.40 per share b) fifty percent (50%) of the lowest trading price of common stock recorded on any trade day after the effective date or c) the lowest effective price per share granted after the effective date. The fair value of the notes has been determined by using Black-Scholes pricing model with the following weighted average assumptions: no dividend yield, expected volatility ranging from 71.48% to 274.85%, risk-free interest rate ranging from .01% to .10%, and an expected life of less than a year. The Company recorded debt discount of $35,000 related to the conversion feature of the notes, along with derivative liabilities at inception. During the six months ended June 30, 2013, the debt discount was amortized, and recorded as interest expense in the amount of $19,472, resulting in a net debt discount of $15,528 at June 30, 2013.
On May 1, 2013, the Company entered into a securities purchase agreement for the sale of a 8% convertible promissory note for the aggregate principal amount of $32,500. The notes mature on February 3, 2014. After one hundred and eighty days (180) the holder may convert into shares of common stock at a variable conversion price of 58% multiplied by the market price of the average lowest three (3) trading prices for the common stock during the ten (10) trading days prior to the conversion date. The fair value of the notes has been determined by using Black-Scholes pricing model with the following weighted average assumptions: no dividend yield, expected volatility ranging from 112.61% to 182.26%, risk-free interest rate ranging from .11% to .15%, and an expected life of less than a year. The Company recorded a debt discount of $32,492 related to the conversion feature of the note, along with a derivative liability at inception. During the six months ended June 30, 2013, the debt discount was amortized, and recorded as interest expense in the amount of $7,013, resulting in a net debt discount of $25,479 at June 30, 2013.
On May 13, 2013, the Company received in consideration upon execution of a note the sum of $25,000 on a securities purchase agreement entered into for the sale of a 10% convertible promissory note in the aggregate principal amount of $80,000, to be advanced in amounts at the lenders discretion. The note matured six (6) months from the effective date of each advance. The note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of the lesser of $0.40 per share or fifty percent (50%) of the lowest trading price recorded on any trade day after the effective date. The fair value of the notes has been determined by using the Black-Scholes pricing model with the following weighted average assumptions: no dividend yield, expected volatility ranging from 135.81% to 184.0%, risk-free interest rate ranging from .08% to .09%, and an expected life of less than a year. The Company recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the six months ended June 30, 2013, the debt discount was amortized, and recorded as interest expense in the amount of $6,667, resulting in a net debt discount of $18,333 at June 30, 2013.
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On June 5, 2013, the Company executed two convertible promissory notes in exchange for services rendered in the aggregate amount of $242,000. The Company entered into securities purchase agreements for the sale of 5% convertible promissory notes in the principal amount of $242,000, which are convertible into shares of common stock of the Company at a conversion price equal to the lesser of $0.24 per share or the closing price per share of common stock recorded on the trading day immediately preceding the date of conversion. The notes mature two (2) years from their effective dates. The fair value of the notes has been determined by using the Black-Scholes pricing model with the following weighted average assumptions: no dividend yield, expected volatility ranging from 95.58% to 109.12%, risk-free interest rate ranging from .22% to .34%, and an expected life of two (2) years. The Company recorded a debt discount of $160,479 related to the conversion feature of the note, along with a derivative liability at inception. During the six months ended June 30, 2013, the debt discount was amortized, and recorded as interest expense in the amount of $5,496, resulting in a net debt discount of $154,984 at June 30, 2013.
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On June 21, 2013, the Company received in consideration upon execution of a note the sum of $25,000 on a securities purchase agreement entered into for the sale of a 10% convertible promissory note in the aggregate principal amount of $100,000, to be advanced in amounts at the lenders discretion. The note matures one (1) year from the effective date of each advance. The note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of the lesser of $0.40 per share or fifty percent (50%) of the lowest trading price recorded on any trade day after the effective date. The fair value of the notes has been determined by using the Black-Scholes pricing model with the following weighted average assumptions: no dividend yield, expected volatility ranging from 137.04% to 138.03.0%, risk-free interest rate ranging from .13% to .15%, and an expected life of one (1) year. The Company recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the six months ended June 30, 2013, the debt discount was amortized, and recorded as interest expense in the amount of $614, resulting in a net debt discount of $24,386 at June 30, 2013.
10
BIOSOLAR, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS-UNAUDITED
JUNE 30, 2013
5. CONVERTIBLE PROMISSORY NOTES (Continued)
We evaluated the financing transactions in accordance with ASC Topic 815, Derivatives and Hedging, and determined that the conversion feature of the convertible promissory note was not afforded the exemption for conventional convertible instruments due to its variable conversion rate. The note has no explicit limit on the number of shares issuable so they did not meet the conditions set forth in current accounting standards for equity classification. The Company elected to recognize the note under paragraph 815-15-25-4, whereby, there would be a separation into a host contract and derivative instrument. The Company elected to initially and subsequently measure the note in its entirety at fair value, with changes in fair value recognized in earnings. The Company recorded a derivative liability representing the imputed interest associated with the embedded derivative. The derivative liability is adjusted periodically according to the stock price fluctuations. At the time of conversion, any remaining derivative liability will be charged to additional paid-in capital.
The change in derivative liability recognized in the financial statements as of June 30, 2013 was $244,117.
6. SUBSEQUENT EVENT
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Management has evaluated subsequent events according to the requirements of ASC TOPIC 855, and has reported the following subsequent events:
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On July 10, 2013, the Company entered into a stock purchase agreement and received funds in the amount of $100,000 to purchase 357,143 shares of common stock at a price of $0.028 per share.
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On July 18, 2013, the Company entered into a stock purchase agreement and received funds in the amount of $42,000 to purchase 150,000 shares of common stock at a price of $0.028 per share.
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Special Note on Forward-Looking Statements.
Certain statements in “Management’s Discussion and Analysis or Plan of Operation” below, and elsewhere in this report, are not related to historical results, and are forward-looking statements. Forward-looking statements present our expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. 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 such forward-looking statements. Forward-looking statements frequently are accompanied by such words such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms or other words and terms of similar meaning. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, or timeliness of such results. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this annual report. Subsequent written and oral forward looking statements attributable to us or to persons acting in our behalf are expressly qualified in their entirety by the cautionary statements and risk factors set forth in our annual report on Form 10-K filed with the SEC on February 26,2013, and in other reports filed by us with the SEC
You should read the following description of our financial condition and results of operations in conjunction with the financial statements and accompanying notes included in this report.
Overview
We are developing an innovative technology to produce bio-based materials from renewable plant sources that will reduce the cost per watt of Photovoltaic solar modules. Most of the solar industry is focused on photovoltaic efficiency to reduce cost, but we are introducing a new dimension of cost reduction by replacing petroleum-based plastic solar module components with durable bio-based components. The process for producing electricity from sunlight is known as Photovoltaics. Photovoltaic ("PV") is the science of capturing and converting sun light into electricity.
We are focusing our research and product development efforts on producing bio-based components that meet the thermal and durability requirements of current PV solar module manufacturing processes for conventional crystalline cell designs as well as thin film PV devices in an effort to capitalize on what we perceive as cost advantages to current petroleum based PV solar module components. We currently use Nylon 11, which is derived from castor oil in the development of our technology. Our current supplier of this product is Arkema, Inc. We do not currently have an agreement with Arkema for the supply of Nylon 11 and there is currently no other known supplier of Nylon 11. If we are unable to obtain Nylon 11 for our products, we will seek alternative options which may include similar biobased materials such as Nylon 1010 for which there are many known suppliers.
We are focusing our research and product development efforts on bio-based backsheets, substrates, superstrates, module and panel components.
We were incorporated in the State of Nevada on April 24, 2006, as BioSolar Labs, Inc. Our name was changed to BioSolar, Inc. on June 8, 2006. Our principal executive offices are located at 27936 Lost Canyon Road, Suite 202, Santa Clarita, California 91387, and our telephone number is (661) 251-0001. Our fiscal year end is December 31.
Application of Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. 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 disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to impairment of property, plant and equipment, intangible assets, deferred tax assets and fair value computation using the Black Scholes option pricing model. We base our estimates on historical experience and on various other assumptions, such as the trading value of our common stock and estimated future undiscounted cash flows, that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions; however, we believe that our estimates, including those for the above-described items, are reasonable.
Use of Estimates
In accordance with accounting principles generally accepted in the United States, management utilizes estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates and assumptions relate to recording net revenue, collectability of accounts receivable, useful lives and impairment of tangible and intangible assets, accruals, income taxes, inventory realization, stock-based compensation expense and other factors. Management believes it has exercised reasonable judgment in deriving these estimates. Consequently, a change in conditions could affect these estimates.
Fair Value of Financial Instruments
Our cash, cash equivalents, investments, inventory, prepaid expenses, and accounts payable are stated at cost which approximates fair value due to the short-term nature of these instruments.
Recently Issued Accounting Pronouncements
Management reviewed accounting pronouncements issued during the six months ended June 30, 2013 and no pronouncements were adopted during the period.
Results of Operations – Three Months Ended June 30, 2013 Compared to the Three Months Ended June 30, 2012
OPERATING EXPENSES
General and Administrative Expenses
General and administrative (“G&A”) expenses decreased by $(38,908) to $137,808 for the three months ended June 30, 2013, compared to $176,716 for the prior period ended June 30, 2012. This decrease in G&A expenses was the result of a decrease in non-cash stock compensation expense of $(17,224), decrease in payroll tax expense of (16,212), decrease in travel of $(2,393), and an overall decrease of $(3,079) in G&A expenses.
Research and Development
Research and Development (“R&D”) expenses were $714 for the three months ended June 30, 2013, compared to $3,741 for the prior period ended June 30, 2012. R&D costs have decreased due to the Company shifting its focus to product marketing.
Other Income/(Expenses)
Other income and expenses increased by $102,888 to $102,883 for the three months ended June 30, 2013, compared to $(5) for the prior period ended June 30, 2012. The increase was the result of an increase in interest income of $(13), an increase on gain in settlement of debt of $(4,676), the change in fair value of the derivative instruments of $36,375, amortization of debt discount in the amount of $67,347, and an increase interest expense in the amount of $3,855. The increase is the result of the execution of convertible promissory notes.
Net Loss
Our loss increased by $(60,995) to $(243,455) for the three months ended June 30, 2013, compared to $(182,460) for the prior period ended June 30, 2012. The increase in net loss was due to an increase in non-cash change in fair value of derivative instruments, amortization of debt discount, gain on settlement of debt, and an overall decrease in operating expenses. Currently the Company is in its development stage and had no revenues.
Results of Operations – Six Months Ended June 30, 2013 Compared to the Six Months Ended June 30, 2012
OPERATING EXPENSES
General and Administrative Expenses
General and administrative (“G&A”) expenses decreased by $(131,954) to $320,774 for the six months ended June 30, 2013, compared to $452,728 for the prior period ended June 30, 2012. This decrease in G&A expenses was the result of a decrease in non-cash stock compensation expense of $(104,376), decrease in payroll tax expense of (14,174), decrease in travel of $(10,668) and an overall decrease of $(2,736) in G&A expenses.
Research and Development
Research and Development (“R&D”) expenses were $2,029 for the six months ended June 30, 2013, compared to $37,735 for the prior period ended June 30, 2012. R&D costs have decreased due to the Company shifting its focus to product marketing.
Other Income/(Expenses)
Other income and expenses increased by $345,599 to $345,775 for the six months ended June 30, 2013, compared to $176 the prior period ended June 30, 2012. The increase was the result of an increase in interest income of $5, an increase on gain in settlement of debt of $4,676, the change in fair value of the derivative instruments of $244,117, amortization of debt discount in the amount of $100,474, and an increase interest expense in the amount of $5,689. The increase in other income and expenses was the result of the execution of convertible promissory notes.
Net Loss
Our loss increased by $(178,046) to $(672,679) for the six months ended June 30, 2013, compared to $(494,633) for the prior period ended June 30, 2012. The increase in net loss was due to an increase in non-cash change in fair value of derivative instruments, amortization of debt discount, gain on settlement of debt, and an overall decrease in operating expenses. Currently the Company is in its development stage and had no revenues.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2013, we had a capital deficit of $(525,575) compared to working capital of $(190,013) for the year ended December 31, 2012. This increase in capital deficit of $(335,562) was due primarily to an increase in accounts payable, derivative liability, and convertible notes, with a decrease in accrued expenses
During the six months ended June 30, 2013, the cash used in operating activities was $(182,425) as compared to $(205,211) for the prior period ended June 30, 2012. The decrease of $(22,786) in the use of cash for operating activities was primarily due to an overall increase in net loss, prepaid expenses, non cash change in fair value derivative instruments, and debt discount, with a decrease in accounts payable, accrued expenses, and non cash stock compensation.
Cash used in investing activities for the six months ended June 30, 2013 was $(455), as compared to $(3,664) for the prior period ended June 30, 2012. The overall net change of $(3,209) in investing activities was primarily due to a decrease in patent expenditures, and no purchase of equipment for the current period compared to the prior period.
Cash provided from financing activities was $263,550 for the six months ended June 30, 2013, as compared to $230,615 for the prior period ended June 30, 2012. Our capital needs have primarily been met from the proceeds of equity financing and convertible debt, as we are currently in the development stage and have not generated any revenues since inception.
We do not have any material commitments for capital expenditures during the next twelve months. Although proceeds from our financing activities are currently sufficient to fund our operating expenses through the next four months, we will need to raise additional funds in the future so that we can expand our operations. Therefore, our future operations are dependent on our ability to secure additional financing. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, or experience unexpected cash requirements that would force us to seek additional financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we may have to curtail our marketing and development plans and possibly cease our operations.
We believe that we have assets to ensure that we can function without liquidation over the next four months, due to our cash on hand, and our ability to raise money from our investor base. Based on the aforesaid, we believe we have the ability to continue our operations for the next twelve months and will be able to realize assets and discharge liabilities in the normal course of our operations.
Our financial statements as of June 30, 2013 have been prepared under the assumption that we will continue as a going concern from inception (April 24, 2006) through June 30, 2013. Our independent registered public accounting firm has issued their report dated February 25, 2013 that included an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Our ability to continue as a going concern ultimately is dependent on our ability to generate revenue, which is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and, ultimately, to achieve profitable operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
PLAN OF OPERATION AND FINANCING NEEDS
We are engaged in the development of an innovative technology to produce bio-based materials from renewable plant sources that will reduce the cost per watt of Photovoltaic solar cells. We plan to develop our products and thereafter focus our efforts on establishing markets in related sectors by the end of 2013.
Our plan of operation within the next six months is to utilize our cash balances to fully commercialize our bio-based backsheet component (BioBacksheetTM) to replace the petroleum based backsheet in crystalline photovoltaic modules. In addition, we intend to further enhance test programs to determine the physical properties
and characteristics that will be most suitable for the further development of biobased solar module components, and build solar panels, as we attempt to validate the commercial viability of our product. We believe that our current cash and investment balances will be sufficient to support development activity and general and administrative expenses for the next four months. Management estimates that it will require additional cash resources during 2013, based upon its current operating plan and condition. We expect increased expenses during second half of 2013 as we ramp up sales and marketing efforts associated with gradual production volume increase. We will be investigating additional financing alternatives, including equity and/or debt financing. There is no assurance that capital in any form would be available to us, and if available, on terms and conditions that are acceptable. If we are unable to obtain sufficient funds during the next twelve months, we may be forced to reduce the size of our organization, which could have a material adverse impact on, or cause us to curtail and/or cease the development of our products.
Off-Balance Sheet Arrangements
We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, result of operations, liquidity or capital expenditures.
n/a
As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms, and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There was no change to our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
We are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.
There are no material changes from the risk factors previously disclosed in the Registrant’s Form 10-K filed on February 26, 2013
During the three month ended June 30, 2013, the Company issued 392,788 shares of common stock associated with conversion of two securities purchase agreements for the aggregate principal amount of $75,000 in convertible notes, plus accrued interest of $3,000.
The Company relied on an exemption pursuant to Section 4(2) of the Securities Act of 1933, as amended in connection with the sale and issuances of its shares of common stock described above.
None
None
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Description
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31.1
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Certification by Chief Executive Officer and Acting Chief Financial Officer pursuant to Sarbanes-Oxley Section 302 (filed herewith).
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32.2
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Certification by Chief Executive Officer and Acting Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (filed herewith).
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EX-101.INS
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XBRL Instance Document
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EX-101.SCH
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XBRL Taxonomy Extension Schema Document
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EX-101.CAL
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XBRL Taxonomy Extension Calculation Linkbase
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EX-101.DEF
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XBRL Taxonomy Extension Definition Linkbase
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EX-101.LAB
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XBRL Taxonomy Extension Labels Linkbase
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EX-101.PRE
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XBRL Taxonomy Extension Presentation Linkbase
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In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California, on July 26, 2013.
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BIOSOLAR
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By:
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/s/ David Lee
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Chief Executive Officer (Principal Executive
Officer ) and Acting Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
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