NewHydrogen, Inc. - Quarter Report: 2013 March (Form 10-Q)
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 MARCH 31, 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 o 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 May 6, 2013 was 7,025,342.
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PART II: OTHER INFORMATION
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March 31, 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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||||||||
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Cash
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$ | 114,075 | $ | 42,942 | ||||
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Prepaid expenses
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29,693 | 11,523 | ||||||
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TOTAL CURRENT ASSETS
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143,768 | 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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(36,844 | ) | (34,793 | ) | ||||
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NET PROPERTY AND EQUIPMENT
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44,947 | 46,998 | ||||||
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OTHER ASSETS
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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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$ | 231,230 | $ | 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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$ | 15,101 | $ | 9,253 | ||||
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Accrued expenses
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248,313 | 180,594 | ||||||
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Derivative liability
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303,651 | - | ||||||
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Convertible promissory notes less debt discount of $62,781
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57,219 | 54,631 | ||||||
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TOTAL CURRENT LIABILITIES
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624,284 | 244,478 | ||||||
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SHAREHOLDERS' DEFICIT
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Common stock, $0.0001 par value;
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500,000,000 authorized common shares
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6,939,186 and 6,434,413 shares issued and outstanding, respectively
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695 | 644 | ||||||
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Additional paid in capital
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5,813,754 | 5,676,680 | ||||||
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Deficit accumulated during the development stage
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(6,207,503 | ) | (5,778,279 | ) | ||||
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TOTAL SHAREHOLDERS' DEFICIT
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(393,054 | ) | (100,955 | ) | ||||
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TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT
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$ | 231,230 | $ | 143,523 | ||||
The accompanying notes are an integral part of these financial statements
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From Inception
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April 24, 2006
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Three Months Ended
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through
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March 31, 2013
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March 31, 2012
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March 31, 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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182,966 | 276,011 | 5,084,229 | |||||||||
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Research and development
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1,315 | 33,994 | 815,672 | |||||||||
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Depreciation and amortization
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2,051 | 1,986 | 36,844 | |||||||||
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TOTAL OPERATING EXPENSES
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186,332 | 311,991 | 5,936,745 | |||||||||
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LOSS FROM OPERATIONS BEFORE OTHER INCOME
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(186,332 | ) | (311,991 | ) | (5,936,745 | ) | ||||||
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TOTAL OTHER INCOME/(EXPENSES)
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Interest income
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1 | 9 | 87,263 | |||||||||
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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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Loss on change in derivative
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(207,742 | ) | - | (207,742 | ) | |||||||
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Interest expense
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(35,151 | ) | (190 | ) | (42,395 | ) | ||||||
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TOTAL OTHER INCOME/(EXPENSES)
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(242,892 | ) | (181 | ) | (270,758 | ) | ||||||
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NET LOSS
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$ | (429,224 | ) | $ | (312,172 | ) | $ | (6,207,503 | ) | |||
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BASIC AND DILUTED LOSS PER SHARE
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$ | (0.07 | ) | $ | (0.05 | ) | ||||||
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WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
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BASIC AND DILUTED
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6,491,009 | 5,791,033 | ||||||||||
The accompanying notes are an integral part of these financial statements
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Deficit
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Additional
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during the
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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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Capital
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Stage
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Total
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Balance at December 31, 2012
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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 (unaudited)
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504,773 | 51 | 110,999 | - | 111,050 | |||||||||||||||
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Adjustment of beneficial conversion feature (unaudited)
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- | - | (20,369 | ) | - | (20,369 | ) | |||||||||||||
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Stock compensation cost (unaudited)
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- | - | 46,444 | - | 46,444 | |||||||||||||||
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Net loss for the three months ended March 31, 2012 (unaudited)
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- | - | - | (429,224 | ) | (429,224 | ) | |||||||||||||
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Balance at March 31, 2013
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6,939,186 | $ | 695 | $ | 5,813,754 | $ | (6,207,503 | ) | $ | (393,054 | ) | |||||||||
The accompanying notes are an integral part of these financial statements
BIOSOLAR, INC.
(A Development Stage Company)
(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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through
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March 31, 2013
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March 31, 2012
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March 31, 2013
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss
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$ | (429,224 | ) | $ | (312,172 | ) | $ | (6,207,503 | ) | |||
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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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2,051 | 1,986 | 36,844 | |||||||||
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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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46,444 | 133,596 | 754,521 | |||||||||
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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
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207,742 | - | 207,742 | |||||||||
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Debt discount recognzied as interest expense
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37,712 | - | 37,712 | |||||||||
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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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(18,170 | ) | 5,129 | (29,693 | ) | |||||||
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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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5,848 | 13,449 | 15,101 | |||||||||
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Accrued expenses
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67,719 | 39,604 | 248,313 | |||||||||
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NET CASH USED IN OPERATING ACTIVITIES
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(84,462 | ) | (118,408 | ) | (4,504,769 | ) | ||||||
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Purchase of equipment
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- | - | (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 | ) | (1,081 | ) | (231,240 | ) | ||||||
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Proceeds from convertible note
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45,000 | - | 120,000 | |||||||||
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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 | 129,799 | 4,527,084 | |||||||||
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NET CASH PROVIDED IN FINANCING ACTIVITIES
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156,050 | 129,799 | 4,850,084 | |||||||||
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NET INCREASE/(DECREASE) IN CASH
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71,133 | 10,310 | 114,075 | |||||||||
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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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$ | 114,075 | $ | 62,732 | $ | 114,075 | ||||||
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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 period ended March 31, 2012, the Company issued 250,201 shares of common stock for warrants through a cashless exercise.
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Also, the Company issued 18,812 shares of common stock for a subscription receivable.
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The accompanying notes are an integral part of these financial statements
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, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. 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 has generated insignificant revenues since inception, 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, as it continues to pursue its business plan and purposes.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of the Company 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 not generated any significant revenues since inception. 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 generated insignificant 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 March 31, 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 December 31, 2012 and 2011, 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.
BIOSOLAR, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS-UNAUDITED
MARCH 31, 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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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 March 31,2013:
Fair Value of Financial Instruments
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Total
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(Level 1)
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(Level 2)
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(Level 3)
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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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$ | 303,651 | $ | - | $ | - | $ | 303,651 | ||||||||
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Convertible Promissory Notes, net of discount
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57,219 | - | - | 57,219 | ||||||||||||
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Total liabilities measured at fair value
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$ | 360,870 | $ | - | $ | - | $ | 360,870 | ||||||||
Recently Issued Accounting Pronouncements
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Management reviewed accounting pronouncements issued during the period ended March 31, 2013, and no pronouncements were adopted during the period.
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3.
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CAPITAL STOCK
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At March 31, 2013, the Company’s authorized stock consisted of 500,000,000 shares of common stock, with a par value of $0.0001.
During the three months ended March 31, 2013, the Company issued 504,773 shares of common stock at a price of $0.22 per share for cash of $111,050.
4. STOCK OPTIONS AND WARRANTS
On March 1, 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. Each Option expires on the date specified in the applicable 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 as set forth in the relevant option agreement, and are exercisable at a price of $0.40 per share, the closing price 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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Expected dividend yield
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None
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BIOSOLAR, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS-UNAUDITED
MARCH 31, 2013
4. STOCK OPTIONS AND WARRANTS
A summary of the Company’s stock option activity and related information follows:
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March 31, 2013
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Number
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average
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of
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exercise
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Options
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price
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Outstanding, beginning of period
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236,667 | $ | 4.05 | |||||
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Granted
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600,000 | 0.40 | ||||||
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Exercised
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- | - | ||||||
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Expired
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- | - | ||||||
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Outstanding, end of period
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836,667 | $ | 1.43 | |||||
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Exercisable at the end of period
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274,167 | $ | 3.55 | |||||
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Weighted average fair value of
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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 March 31, 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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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
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Exercisable
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Life (years)
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| $ | 4.05 | 236,667 | 236,667 | 2.98 | ||||||||||
| $ | 0.40 | 600,000 | 37,500 | 4.92 | ||||||||||
The stock-based compensation expense recognized in the statement of operations during the three months ended March 31, 2013, related to the granting of these options is $46,444.
Warrants
During the three months ended March 31, 2013, the Company granted no warrants. As of March 31, 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 mature on July 5, 2013, and August 14, 2013. 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.
On January 18, 2013, the Company received in consideration upon execution of a note the sum of $10,000 on a securities purchase agreement entered into for the sale of a 10% convertible promissory note in the aggregate principal amount of $80,000. 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 of the securities purchase agreement, or (c) the lowest effective price per share granted after the effective date of the securities purchase agreement. The note matures six (6) months from the effective date of each payment.
On February 28, 2012, the Company entered into two Securities Purchase Agreements (each providing for the sale by the Company of 10% unsecured Convertible Notes in the principal amounts of $10,000 and $25,000 for an aggregate total of $35,000. The Lender may choose in its sole discretion to loan the Company the principal amount of up to $100,000. Each 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) $0.20 per share, or (b) fifty percent (50%) of the lowest trading price recorded on any trade day after the effective date of the securities purchase agreement. Each note matures one (1) year from the effective date of each payment to the Company.
BIOSOLAR, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS-UNAUDITED
MARCH 31, 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 debt discount is amortized over the life of the note and recognized as interest expense. For the period ended March 31, 2013, the Company recognized $33,128 as interest expense. The derivative liability is adjusted periodically according to the stock price fluctuations. At the time of conversion, any remaining derivative liability will be charged to additional paid-in capital. For purpose of determining the fair value of the note, the Company used the Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuation are as follows:
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Stock price on the valuation date
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$ | 0.37 - $0.90 | ||
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Conversion price for the notes
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$ | 0.16 - $0.35 | ||
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Years to maturity
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6 mos - 1 year
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|||
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Risk free rate
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0.10% - 0.16 | % | ||
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Expected volatility
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60.96% - 125.31 | % | ||
The change in derivative liability recognized in the financial statements as of March 31, 2013 was $207,742.
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6. SUBSEQUENT EVENT
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Management has evaluated subsequent events according to the requirements of ASC TOPIC 855, and reported the following.
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During the month of April 2013, the Company issued 86,156 shares of common stock for the partial conversion of a convertible promissory in the amount of $32,500
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ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS
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 below and elsewhere in this annual report, 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 three months ended March 31, 2013 and no pronouncements were adopted during the period.
Results of Operations – Three Months Ended March 31, 2013 Compared to the Three Months Ended March 31, 2012
OPERATING EXPENSES
General and Administrative Expenses
General and administrative (“G&A”) expenses decreased by $(93,045) to $182,966 for the three months ended March 31, 2013, compared to $276,011 for the prior period March 31, 2012. This decrease in G&A expenses was the result of a decrease in non-cash stock compensation expense of $(87,152) and an overall decrease of $(5,893) in G&A expenses.
Research and Development
Research and Development (“R&D”) expenses decreased by $(32,679) to $1,315 for the three months ended March 31, 2013, compared to $33,994 for the prior period ended March 31, 2012. This overall decrease in R&D expenses was the result of focusing on bringing the product to market.
Our net loss increased by $(117,052) to $(429,224) for the three months ended March 31, 2013, compared to $(312,172) for the prior period ended March 31, 2012. The increase in net loss was due to an increase in non-cash change in derivative and amortization of debt discount, 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 March 31, 2013, we had a capital deficit of $(480,516) compared to working capital of $(190,013) for the year ended December 31, 2012. This increase in capital deficit of $(290,503) was due primarily to an increase in accounts payable, accrued expenses, and derivative liability.
During the three months ended March 31, 2013, we used $(84,462) of cash for operating activities, as compared to $(118,408) for the prior period ended March 31, 2012. The decrease of $(33,946) in the use of cash for operating activities was primarily due to an overall increase in net loss, prepaid expenses, accounts payable, accrued expenses, non cash loss on change in derivative, and debt discount, with a decrease in non cash stock compensation.
Cash used in investing activities for the three months ended March 31, 2013 was $(455), as compared to $(1,081) for the prior period ended March 31, 2012. The overall net change of $(626) in investing activities was primarily due to decrease in patent expenditures for the current period compared to the prior period.
Cash provided from financing activities was $111,050 for the three months ended March 31, 2013, as compared to $129,799 for the prior period March 31, 2012. Our capital needs have primarily been met from the proceeds of private placements, 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 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 twelve months, due to our cash on hand, and our ability to raise funds 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 March 31, 2013 have been prepared under the assumption that we will continue as a going concern from inception (April 24, 2006) through March 31, 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 a profit 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 period ended March 31, 2013, the Company issued 504,773 shares of common stock at $0.22 per share for cash of $111,050. The proceeds were used for operating expenses.
The Company relied on an exemption pursuant to Rule 506 of Regulation D and/or 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.
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Description
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XBRL Instance Document
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XBRL Taxonomy Extension Schema Document
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XBRL Taxonomy Extension Calculation Linkbase
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XBRL Taxonomy Extension Definition Linkbase
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XBRL Taxonomy Extension Labels Linkbase
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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 May 10, 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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