NewHydrogen, Inc. - Quarter Report: 2013 September (Form 10-Q)

biosolar10q102232013.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 SEPTEMBER 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)

Nevada		20-4754291
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

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 October 24, 2013 was 8,464,709.

BIOSOLAR, INC.

INDEX

PART I: FINANCIAL INFORMATION
ITEM 1:	FINANCIAL STATEMENTS (Unaudited)
	Balance Sheets	3
	Statements of Operations	4
	Statement of Shareholders' Deficit	5
	Statements of Cash Flows	6
	Notes to the Financial Statements	7
ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	12
ITEM 3 :	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	16
ITEM 4:	CONTROLS AND PROCEDURES	16
PART II: OTHER INFORMATION
Item 1	LEGAL PROCEEDINGS
ITEM 1A :	RISK FACTORS	16
ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	17
ITEM 3	DEFAULTS UPON SENIOR SECURITIES	17
ITEM 4	MINE SAFETY DISCLOSURES	17
ITEM 5	OTHER INFORMATION	17
ITEM 6:	EXHIBITS	17
SIGNATURES		18

Table of Contents

PART I –FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BIOSOLAR, INC.

(A Development Stage Company)

BALANCE SHEETS

	September 30, 2013			December 31, 2012
	(Unaudited)
ASSETS

CURRENT ASSETS
Cash	$	286,576		$	42,942
Prepaid expenses		16,085			11,523

TOTAL CURRENT ASSETS		302,661			54,465

PROPERTY AND EQUIPMENT
Machinery and equipment		78,863			78,863
Computer		2,928			2,928
		81,791			81,791
Less accumulated depreciation		(40,945	)		(34,793	)

NET PROPERTY AND EQUIPMENT		40,846			46,998

OTHER ASSETS
Patents		47,098			41,290
Deposit		770			770

TOTAL OTHER ASSETS		47,868			42,060

TOTAL ASSETS	$	391,375		$	143,523



LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES
Accounts payable	$	2,320		$	9,253
Accrued expenses		25,836			180,594
Derivative liability		718,799			-
Convertible promissory notes less debt discount of $221,648		187,852			54,631

TOTAL CURRENT LIABILITIES		934,807			244,478

SHAREHOLDERS' DEFICIT
Preferred stock, $0.0001 par value;
10,000,000 authorized common shares		-			-
Common stock, $0.0001 par value;
500,000,000 authorized common shares
8,464,709 and 6,434,413 shares issued and outstanding, respectively		846			644
Additional paid in capital		6,372,332			5,676,680
Deficit accumulated during the development stage		(6,916,610	)		(5,778,279	)

TOTAL SHAREHOLDERS' DEFICIT		(543,432	)		(100,955	)

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	391,375		$	143,523

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BIOSOLAR, INC.

(A Development Stage Company)

STATEMENT OF OPERATIONS

													From Inception
													April 24, 2006
	Three Months Ended						Nine Months Ended						through
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012			September 30, 2013

REVENUE	$	-		$	-		$	-		$	-		$	-

OPERATING EXPENSES
General and administrative expenses		173,868			175,258			494,642			627,987			5,395,905
Research and development		707			36,399			2,736			74,134			817,093
Depreciation and amortization		2,051			2,051			6,152			6,045			40,945

TOTAL OPERATING EXPENSES		176,626			213,708			503,530			708,166			6,253,943

LOSS FROM OPERATIONS BEFORE OTHER INCOME		(176,626	)		(213,708	)		(503,530	)		(708,166	)		(6,253,943	)

TOTAL OTHER INCOME/(EXPENSES)
Interest income		46			5			66			19			87,328
Penalties		-			-			-			-			(180	)
Loss on patent impairment		-			-			-			-			(107,704	)
Gain on settlement of debt		2,090			-			6,765			-			6,765
Loss on change in derivative liability		(216,998	)		-			(461,115	)		-			(461,115	)
Interest expense		(74,164	)		(442	)		(180,517	)		(632	)		(187,761	)

TOTAL OTHER INCOME/(EXPENSES)		(289,026	)		(437	)		(634,801	)		(613	)		(662,667	)


NET LOSS	$	(465,652	)	$	(214,145	)	$	(1,138,331	)	$	(708,779	)	$	(6,916,610	)


BASIC AND DILUTED LOSS PER SHARE	$	(0.06	)	$	(0.03	)	$	(0.16	)	$	(0.12	)

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED		8,043,574			6,284,908			7,232,969			6,151,345

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BIOSOLAR, INC.

(A Development Stage Company)

STATEMENTS OF SHAREHOLDER'S DEFICIT

												Deficit
												Accumulated
									Additional			during the
	Preferred Stock				Common Stock				Paid-in			Development Stage
	Shares		Amount		Shares		Amount		Capital						Total
Balance at December 31, 2012 (Audited)		-	$	-		6,434,413	$	644	$	5,676,680		$	(5,778,279	)	$	(100,955	)

Issuance of common shares for cash at a price of $0.22 and $0.28 per share		-		-		1,530,631		153		398,138			-			398,291

Issuance of common shares for converted promissory notes		-		-		499,665		49		213,070			-			213,119

Adjustment of beneficial conversion feature		-		-		-		-		(20,369	)		-			(20,369	)

Stock compensation cost		-		-		-		-		104,813			-			104,813

Net loss for the nine months ended September 30,2013		-		-		-		-		-			(1,138,331	)		(1,138,331	)

Balance at September 30, 2013		-	$	-		8,464,709	$	846	$	6,372,332		$	(6,916,610	)	$	(543,432	)

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BIOSOLAR, INC.

(A Development Stage Company)

STATEMENTS OF CASH FLOWS


							From Inception
							April 24, 2006
	Nine Months Ended						through
	September 30, 2013			September 30, 2012			September 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,138,331	)	$	(708,779	)	$	(6,916,610	)
Adjustment to reconcile net loss to net cash
used in operating activities
Depreciation and amortization expense		6,152			6,045			40,945
Issuance of stock for services		-			-			325,260
Stock compensation cost		104,813			226,924			812,890
Beneficial conversion feature		(4,584	)		-			-
Loss on patent impairment		-			-			107,704
Loss on change in derivative liability		461,115			-			461,115
Gain on settlement of debt		(6,765	)		-			(6,765	)
Debt discount recognized as interest expense		171,817			-			171,817
Common stock issued for interest payable		3,687			-			3,687
Changes in Assets and Liabilities
(Increase) Decrease in:
Prepaid expenses		(4,562	)		16,686			(16,085	)
Deposits		-			-			(770	)
Increase (Decrease) in:
Accounts payable		(6,933	)		32,769			2,320
Accrued expenses		87,242			154,399			267,836

NET CASH USED IN OPERATING ACTIVITIES		(326,349	)		(271,956	)		(4,746,656	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment		-			(2,583	)		(81,791	)
Patent expenditures		(5,808	)		(1,081	)		(154,802	)

NET CASH USED IN INVESTING ACTIVITIES		(5,808	)		(3,664	)		(236,593	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible promissory notes		177,500			-			252,500
Proceeds from common stock subcription payable		-			-			203,000
Proceeds from issuance of common stock, net of issuance cost		398,291			255,365			4,814,325

NET CASH PROVIDED IN FINANCING ACTIVITIES		575,791			255,365			5,269,825

NET INCREASE/(DECREASE) IN CASH		243,634			(20,255	)		286,576

CASH, BEGINNING OF PERIOD		42,942			52,422			-

CASH, END OF PERIOD	$	286,576		$	32,167		$	286,576

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	-		$	442		$	1,262
Taxes paid	$	-		$	-		$	-

SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS
Common stock issued for prepaid services	$	-		$	-		$	5,867

During the nine months ended September 30, 2013, the Company entered into securities purchase agreements in the amount of $242,000 to purchase common stock in exchange
for accrued salaries. The accrued salaries were reclassified as convertible promissory notes during the period. Also, the Company converted an aggregate of $85,000 convertible
promissory notes, including accrued interest in the amount of $3,687, for 499,665 shares of common stock. During the nine months ended September 30, 2012, the Company issued
332,602 shares of common stock for 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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BIOSOLAR, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS-UNAUDITED

SEPTEMBER 30, 2013

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 nine months ended September 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 through the issuance and sale of its securities to its shareholders since its inception. It is management's plan to generate additional working capital from the issuance and sale of its securities to enable to the Company 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 nine months ended September 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 September 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.

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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:

Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

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

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.

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 September 30, 2013:

Fair Value of Financial Instruments

	Total		(Level 1)		(Level 2)		(Level 3)

Assets	$	-	$	-	$	-	$	-

Total assets measured at fair value	$	-	$	-	$	-	$	-

Liabilities

Derivative Liability	$	718,799	$	-	$	-	$	718,799
Convertible Promissory Notes, net of discount		187,852		-		-		187,852
Total liabilities measured at fair value	$	906,651	$	-	$	-	$	906,651

Recently Issued Accounting Pronouncements

Management reviewed accounting pronouncements issued during the period ended September 30, 2013, and no pronouncements were adopted during the period.

3.	CAPITAL STOCK

On July 10, 2013, the Company filed an amendment to its Articles of Incorporation to increase its authorized common and preferred stock. As of September 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 nine months ended September 30, 2013, the Company issued 504,773 shares of common stock at a price of $0.22 per share for cash of $111,050; issued 1,025,858 shares of common stock at a price of $0.28 per share for cash of $287,241. Also, the Company issued 499,665 shares of common stock at prices ranging from $0.10 to $0.39, for conversion of $85,000 in convertible promissory notes, including $3,687 for accrued interest payable.

4. STOCK OPTIONS AND WARRANTS

On March 1, 2013, the Board of Directors of the Company granted non-qualified stock options to purchase 600,000 shares of common stock of the Company to its employees, directors and consultants. 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.

Risk free interest rate	0.75%
Stock volatility factor	82%
Weighted average expected option life	5 years
Expected dividend yield	None

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4. STOCK OPTIONS AND WARRANTS (Continued)

A summary of the Company’s stock option activity and related information follows:

	September 30, 2013				2007
			Weighted					Weighted
	Number		average		Number			average
	of		exercise		of			exercise
	Options		price		Options			price
Outstanding, beginning of period		236,667	$	4.05		1,740,000		$	0.255
Granted		600,000		0.40		-			-
Exercised		-		-		(50,000	)		-
Expired		-		-		-			-
Outstanding, end of period		836,667	$	1.43		1,690,000		$	0.255
Exercisable at the end of period		499,167	$	2.13		1,650,425		$	0.260
Weighted average fair value of
options granted during the period			$	0.40				$	0.500

The weighted average remaining contractual life of options outstanding as of September 30, 2013 was as follows:

						Weighted
						Average
		Stock		Stock		Remaining
Exercisable		Options		Options		Contractual
Prices		Outstanding		Exercisable		Life (years)
$	4.05		236,667		236,667		2.48
$	0.40		600,000		262,500		4.42
			836,667		499,167

The stock-based compensation expense recognized in the statement of operations during the three months ended September 30, 2013, related to the granting of these options is $104,813.

Warrants

During the nine months ended September 30, 2013, the Company granted no warrants. As of September 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 each providing for the sale by the Company of 8% unsecured Convertible Notes in the principal amounts of $42,500, and $32,500 for an aggregate total of $75,000. The notes matured 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 September 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 nine months ended September 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 September 30, 2013.

On January 18, 2013, the Company entered into a securities purchase agreement for the sale of 10% convertible promissory note for the aggregate principal amount of $80,000, to be advanced in amounts at the lender’s discretion. Upon execution of the securities purchase agreement, the Company received an advance of $10,000. On April 16, 2013, the Company received an additional advance of $25,000. The total advances received as of September 30, 2013 was $35,000, of which $10,000 in principal, and $687 in accrued interest was converted into 106,577 shares of common stock on September 29, 2013. During July 2013, the Company extended the maturity date of the note from six (6) months to eighteen (18) 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 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 more 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 nine months ended September 30, 2013, the debt discount was amortized, and recorded as interest expense in the amount of $22,831, resulting in a net debt discount of $12,169 at September 30, 2013.

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5. CONVERTIBLE PROMISSORY NOTES (Continued)

On March 1, 2013, the Company entered into a securities purchase agreement, providing for the sale by the Company of a 10% unsecured Convertible Note in the aggregate principal amount of $100,000, to be advanced in amounts at the lender’s discretion. The total advance received on the note as of September 30, 2013 was $10,000. 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 $0.20 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 note 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 168.03%, risk-free interest rate ranging from .04% to .16%, and an expected life of a year. The Company recorded debt discount of $10,000 related to the conversion feature of the note, along with derivative liability at inception. During the nine months ended September 30, 2013, the debt discount was amortized, and recorded as interest expense in the amount of $5,836, resulting in a net debt discount of $4,164 at September 30, 2013.

On March 20, 2013, the Company entered into a securities purchase agreement, providing for the sale by the Company a 10% unsecured Convertible Note in the aggregate principal amount of $100,000, to be advanced in amounts at the lender’s discretion. The total advance received on the note as of September 30, 2013 was $25,000. 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 $0.20 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 note has been determined by using the Black-Scholes pricing model with the following weighted average assumptions: no dividend yield, expected volatility ranging from 88.93% to 165.50%, risk-free interest rate ranging from .04% to .16%, and an expected life of a year. The Company recorded debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2013, the debt discount was amortized, and recorded as interest expense in the amount of $13,288, resulting in a net debt discount of $11,712 at September 30, 2013.

On May 1, 2013, the Company entered into a securities purchase agreement for the sale of an 8% convertible promissory note for the aggregate principal amount of $32,500. The note matures 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 note 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 .10% 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 nine months ended September 30, 2013, the debt discount was amortized, and recorded as interest expense in the amount of $17,765, resulting in a net debt discount of $14,727 at September 30, 2013.

On May 13, 2013, the Company entered into a securities purchase agreement for the sale of a 10% convertible promissory note in the aggregate principal amount of $80,000, to be advanced in amounts at the lender’s discretion. Upon execution of the securities purchase agreement, the Company received an advance of $25,000. The note matures 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 98.91% to 184.0%, risk-free interest rate ranging from .02% 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 nine months ended September 30, 2013, the debt discount was amortized, and recorded as interest expense in the amount of $19,444, resulting in a net debt discount of $5,556 at September 30, 2013.

On June 5, 2013, the Company issued two 5% convertible promissory notes in exchange for services rendered in the aggregate amount of $242,000. The notes 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 117.40%, 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 nine months ended September 30, 2013, the debt discount was amortized, and recorded as interest expense in the amount of $25,721, resulting in a net debt discount of $134,758 at September 30, 2013.

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5. CONVERTIBLE PROMISSORY NOTES (Continued)

On June 21, 2013, the Company entered into a securities purchase agreement] for the sale of a 10% convertible promissory note in the aggregate principal amount of $100,000, to be advanced in amounts at the lender’s discretion. Upon execution of the securities purchase agreement, the Company received an advance of $25,000. On July 26, 2013, the Company received an additional advance of $25,000. The total advances received on the note as of September 30, 2013 was $50,000. 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 159.84%, risk-free interest rate ranging from .11% to .15%, and an expected life of one (1) year. The Company recorded a debt discount of $50,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2013, the debt discount was amortized, and recorded as interest expense in the amount of $11,438, resulting in a net debt discount of $38,562 at September 30, 2013.

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 derivative liability recognized in the financial statements as of September 30, 2013 was $718,799.

6. SUBSEQUENT EVENT

Management has evaluated subsequent events according to the requirements of ASC TOPIC 855, and has reported no subsequent events.

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ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Special Note on Forward-Looking Statements.

Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” 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 contained herein after the date of this 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 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

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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 nine months ended September 30, 2013 and no pronouncements were adopted during the period.

Results of Operations – Three Months Ended September 30, 2013 Compared to the Three Months Ended September 30, 2012

OPERATING EXPENSES

General and Administrative Expenses

General and administrative (“G&A”) expenses decreased by $1,390 to $173,868 for the three months ended September 30, 2013, compared to $175,258 for the prior period ended September 30, 2012. This decrease in G&A expenses was the result of a decrease in non-cash stock compensation expense of $17,735, an increase in license fees of $2,514, delivery expense of $3,976, professional fees of $9,263 and an overall increase of $592 in other G&A expenses.

Research and Development

Research and Development (“R&D”) expenses were $707 for the three months ended September 30, 2013, compared to $36,399 for the prior period ended September 30, 2012. R&D costs have decreased due to the Company shifting its focus to product marketing.

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Other Income/(Expenses)

Other income and (expenses) increased by $288,589 to $289,026 for the three months ended September 30, 2013, compared to $437 for the prior period ended September 30, 2012. The increase was the result of an increase in interest income of $40, an increase on gain in settlement of debt of $2,090, the change in fair value of the derivative instruments of $216,998, amortization of debt discount in the amount of $66,758, and an increase in interest expense in the amount of $6,963. The increase in other income and (expenses) was due to the Company entering into debt financing with convertible promissory notes.

Net Loss

Our loss increased by $251,507 to $465,652 for the three months ended September 30, 2013, compared to $214,145 for the prior period ended September 30, 2012. The increase in net loss was due to an increase in other income and (expenses), and an overall decrease in operating expenses. Currently the Company is in its development stage and has no revenues.

Results of Operations – Nine Months Ended September 30, 2013 Compared to the Nine Months Ended September 30, 2012

OPERATING EXPENSES

General and Administrative Expenses

G&A expenses decreased by $133,345 to $494,642 for the nine months ended September 30, 2013, compared to $627,987 for the prior period ended September 30, 2012. This decrease in G&A expenses was the result of an increase in professional fees of $11,448, with a decrease in non-cash stock compensation expense of $122,111, payroll tax expense of $13,696, travel expenses of $10,774 and an overall increase of $1,788 in other G&A expenses.

Research and Development

R&D expenses were $2,736 for the nine months ended September 30, 2013, compared to $74,134 for the prior period ended September 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 $634,188 to $634,801 for the nine months ended September 30, 2013, compared to $613 the prior period ended September 30, 2012. The increase was the result of an increase in interest income of $46, an increase on gain in settlement of debt of $6,766, the change in fair value of derivative instruments of $461,115, amortization of debt discount in the amount of $167,232, and an increase in interest expense in the amount of $12,653. The increase in other income and (expenses) was due to the Company entering into debt financing with convertible promissory notes.

Net Loss

Our loss increased by $429,552 to $1,138,331 for the nine months ended September 30, 2013, compared to $708,779 for the prior period ended September 30, 2012. The increase in net loss was due to an increase in other income and (expenses), and an overall decrease in operating expenses. Currently the Company is in its development stage and has no revenues.

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LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2013, we had a capital deficit of $632,146 compared to working capital of $190,013 for the year ended December 31, 2012. This increase in capital deficit of $442,133 was due primarily to an increase in cash, prepaid expenses, derivative liability, and convertible notes issued by the Company, with a decrease in accounts payable and accrued expenses

During the nine months ended September 30, 2013, the cash used in operating activities was $326,349 as compared to $271,956 for the prior period ended September 30, 2012. The increase of $54,393 in the use of cash for operating activities was primarily due to an overall increase in net loss due to the non-cash cost associated with debt financing transactions consummated by the Company, and an increase in prepaid expenses, with a decrease in accounts payable, accrued expenses, and non cash stock compensation.

Cash used in investing activities for the nine months ended September 30, 2013 was $5,808, as compared to $3,664 for the prior period ended September 30, 2012. The overall net change of $2,144 in investing activities was primarily due to an increase in patent expenditures, and no purchase of equipment for the current period compared to the prior period.

Cash provided from financing activities was $575,791 for the nine months ended September 30, 2013, as compared to $255,365 for the prior period ended September 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 continue to operate 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 September 30, 2013 have been prepared under the assumption that we will continue as a going concern. 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. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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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 nine 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 2014, based upon its current operating plan and condition. We expect increased expenses during the first half of 2014 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 scale back our operations, 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

n/a

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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 third fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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.

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ITEM 1A. RISK FACTORS

There are no material changes from the risk factors previously disclosed in the Registrant’s Form 10-K filed on February 26, 2013.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three months ended September 30, 2013, the Company issued 106,877 shares of common stock upon conversion of principal of $10,000, plus accrued interest of $687 of a convertible note in the aggregate principal amount of $35,000. Also, the Company issued 1,025,858 shares of common stock at a price of $0.28 per share for cash in the amount of $287,241.

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.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Exhibit No.		Description
3.1		Certificate of Amendment filed with the Secretary of State July 10, 2013

31.1		Certification by Chief Executive Officer and Acting Chief Financial Officer pursuant to Sarbanes-Oxley Section 302 (filed herewith).

32.2		Certification by Chief Executive Officer and Acting Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (filed herewith).

EX-101.INS		XBRL Instance Document

EX-101.SCH		XBRL Taxonomy Extension Schema Document

EX-101.CAL		XBRL Taxonomy Extension Calculation Linkbase


EX-101.DEF		XBRL Taxonomy Extension Definition Linkbase

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EX-101.LAB		XBRL Taxonomy Extension Labels Linkbase

EX-101.PRE		XBRL Taxonomy Extension Presentation Linkbase

SIGNATURES

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 October 25, 2013.

	BIOSOLAR

	By:	/s/ David Lee
		Chief Executive Officer (Principal Executive Officer ) and Acting Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)