UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2018

 

☐ TRANSITION REPORT UNDER SECTION 13 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 ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☒
  Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

The number of shares of registrant’s common stock issued and outstanding as of November 5, 2018 was 58,324,093.

  

 

   

 

 

  

BIOSOLAR, INC.

 

INDEX

   

  Page
PART I: FINANCIAL INFORMATION 1
   
ITEM 1 FINANCIAL STATEMENTS (Unaudited) 1
  Condensed Balance Sheets 1
  Condensed Statements of Operations 2
  Condensed Statement of Shareholders’ Deficit 3
  Condensed Statements of Cash Flows 4
  Notes to the Condensed Financial Statements 5
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 17
   
ITEM 1 LEGAL PROCEEDINGS 17
ITEM 1A RISK FACTORS 17
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 18
     
SIGNATURES 19

   

i

 

   

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

BIOSOLAR, INC.

CONDENSED BALANCE SHEETS

    

    September 30,
2018 		    December 31,
2017 		 
    (Unaudited)        
             
ASSETS            
             
CURRENT ASSETS            
Cash   $ 101,969     $ 119,446  
Prepaid expenses     34,174       21,644  
                 
TOTAL CURRENT ASSETS     136,143       141,090  
                 
PROPERTY AND EQUIPMENT                
Machinery and equipment     37,225       31,455  
Less accumulated depreciation     (26,046 )     (23,733 )
                 
NET PROPERTY AND EQUIPMENT     11,179       7,722  
                 
OTHER ASSETS                
Patents, net of amortization of $8,312 and $6,045, respectively     67,175       69,442  
Deposit     770       770  
                 
TOTAL OTHER ASSETS     67,945       70,212  
                 
TOTAL ASSETS   $ 215,267     $ 219,024  
                 
LIABILITIES AND SHAREHOLDERS’ DEFICIT                
                 
CURRENT LIABILITIES                
Accounts payable   $ 35,756     $ 31,845  
Accrued expenses     563,146       414,702  
Derivative liability     25,056,739       5,239,073  
Convertible promissory notes net of debt discount of $192,275 and $5,340, respectively     203,725       396,660  
                 
TOTAL CURRENT LIABILITIES     25,859,366       6,082,280  
                 
LONG TERM LIABILITIES                
Convertible promissory notes net of debt discount of $262 and $351, respectively     2,205,958       1,791,279  
                 
TOTAL LONG TERM LIABILITIES     2,205,958       1,791,279  
                 
TOTAL LIABILITIES     28,065,324       7,873,559  
                 
SHAREHOLDERS’ DEFICIT                
Preferred stock, $0.0001 par value; 10,000,000 authorized preferred shares     -       -  
Common stock, $0.0001 par value; 500,000,000 authorized common shares 56,930,392 and 41,485,051 shares issued and outstanding, respectively     5,693       4,149  
Additional paid in capital     11,476,662       11,127,693  
Accumulated deficit     (39,332,412 )     (18,786,377 )
                 
TOTAL SHAREHOLDERS’ DECIFIT     (27,850,057 )     (7,654,535 )
                 
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT   $ 215,267     $ 219,024  

      

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

 

1

 

   

BIOSOLAR, INC.

CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(Unaudited)

 

    Three Months Ended     Nine Months Ended  
    September 30,
2018 		    September 30,
2017 		    September 30,
2018 		    September 30,
2017 		 
                         
REVENUE   $ -     $ -     $ -     $ -  
                                 
OPERATING EXPENSES                                
General and administrative expenses     107,200       439,082       310,808       1,442,254  
Research and development     90,886       85,506       184,327       117,065  
Depreciation and amortization     1,237       28,032       4,580       29,693  
                                 
TOTAL OPERATING EXPENSES     199,323       552,620       499,715       1,589,012  
                                 
LOSS FROM OPERATIONS BEFORE  OTHER INCOME (EXPENSES)     (199,323 )     (552,620 )     (499,715 )     (1,589,012 )
                                 
OTHER INCOME/(EXPENSES)                                
Interest income     7       9       20       31  
Loss on settlement of debt     -       (93,685 )     (234,733 )     (338,652 )
Gain (Loss) on change in derivative liability     9,894,072       (391,415 )     (19,570,822 )     (926,505 )
Interest expense     (111,185 )     (66,604 )     (240,785 )     (290,297 )
                                 
TOTAL OTHER INCOME (EXPENSES)     9,782,894       (551,695 )     (20,046,320 )     (1,555,423 )
                                 
NET INCOME (LOSS)   $ 9,583,571     $ (1,104,315 )   $ (20,546,035 )   $ (3,144,435 )
                                 
BASIC AND DILUTED EARNING (LOSS) PER SHARE   $ 0.17     $ (0.03 )   $ (0.40 )   $ (0.09 )
                                 
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED 		    56,931,392       37,398,502       51,577,523       34,315,968  

  

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

 

2

 

  

BIOSOLAR, INC.

CONDENSED STATEMENT OF SHAREHOLDERS’ DEFICIT

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(Unaudited) 

 

                            Additional              
    Preferred Stock     Common Stock     Paid-in     Accumulated        
    Shares     Amount     Shares     Amount     Capital     Deficit     Total  
Balance at December 31, 2017     -     $ -       41,485,051     $ 4,149     $ 11,127,693     $ (18,786,377 )   $ (7,654,535 )
                                                         
Issuance of common shares for converted promissory notes and accrued interest     -       -       15,445,341       1,544       348,969       -       350,513  
                                                         
Net Loss     -       -       -       -       -       (20,546,035 )     (20,546,035 )
Balance at September 30, 2018 (Unaudited)     -     $ -       56,930,392     $ 5,693     $ 11,476,662     $ (39,332,412 )   $ (27,850,057 )

 

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

 

3

 

   

BIOSOLAR, INC.

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(Unaudited)

 

    Nine Months Ended  
    September 30,
2018 		    September 30,
2017 		 
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net Loss   $ (20,546,035 )   $ (3,144,435 )
Adjustment to reconcile net loss to net cash used in operating activities                
Depreciation and amortization expense     4,580       29,693  
Stock based compensation     -       1,141,684  
Loss on net change in derivative liability     19,570,822       926,505  
Loss on conversion of debt     234,733       338,652  
Amortization of debt discount recognized as interest expense     59,996       141,450  
(Increase) Decrease in Changes in Assets                
Prepaid expenses     (12,530 )     (10,860 )
Increase (Decrease) in Changes in Liabilities                
Accounts payable     3,911       (3,799 )
Accrued expenses     178,816       147,369  
                 
NET CASH USED IN OPERATING ACTIVITIES     (505,707 )     (433,741 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchase of equipment     (5,770 )     -  
Patent expenditures     -       (699 )
                 
NET CASH USED IN INVESTING ACTIVITIES     (5,770 )     (699 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from convertible promissory notes     494,000       357,000  
                 
NET CASH PROVIDED BY FINANCING ACTIVITIES     494,000       357,000  
                 
NET DECREASE IN CASH     (17,477 )     (77,440 )
                 
CASH, BEGINNING OF PERIOD     119,446       208,629  
                 
CASH, END OF PERIOD   $ 101,969     $ 131,189  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                
Interest paid   $ 1,974     $ 1,382  
Taxes paid   $ -     $ -  
                 
SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS                
Common stock issued for convertible notes and accrued interest   $ 350,513     $ 419,373  

  

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

 

4

 

   

BIOSOLAR, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS – UNAUDITED

FOR THE NINE MONTHS ENDED SEPTEMBER, 2018 AND 2017

 

1. Basis of Presentation

The accompanying unaudited condensed 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, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. 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, 2017.

 

Going Concern

The accompanying condensed 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 unaudited financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company has not generated 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 historically obtained funds through private placements offerings of equity and debt. Management believes that it will be able to continue to raise funds by sale of its securities to its existing shareholders and prospective new investors to provide the additional cash needed to meet the Company’s obligations as they become due, and will allow the development of its core of business. There is no assurance that the Company will be able to continue raising the required capital for its operations.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s unaudited financial statements. The unaudited 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.

 

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 not had significant 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.

 

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these unaudited financial statements, include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, derivative liabilities and the fair value of stock options. Actual results could differ from those estimates.

 

Intangible Assets

The Company has patent applications to protect the inventions and processes behind its proprietary bio-based back-sheet, a protective covering for the back of photovoltaic solar modules traditionally made from petroleum-based film. Intangible assets that have finite useful lives continue to be amortized over their useful lives.

 

5

 

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

  

Stock-Based Compensation

The Company measures the cost of employee services received in exchange for an equity award based on the grant-date fair value of the award. All grants under our stock-based compensation programs are accounted for at fair value and that cost is recognized over the period during which an employee, consultant, or director are required to provide service in exchange for the award (the vesting period). Compensation expense for options granted to employees and non-employees is determined in accordance with the standard as the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measured. Compensation expense for awards granted is re-measured each period.

 

Determining the appropriate fair value of the stock-based compensation requires the input of subjective assumptions, including the expected life of the stock-based payment and stock price volatility.  The Company used Black Scholes to value its stock option awards which incorporated the Company’s stock price, volatility, U.S. risk-free rate, dividend rate, and estimated life. The stock options terminate seven (7) years from the date of grant or upon termination of employment. As of September 30, 2018, 15,950,000 stock options are outstanding.

  

Net Earnings (Loss) per Share Calculations

Net earnings (Loss) per share dictates the calculation of basic earnings (loss) per share and diluted earnings per share. Basic earnings (loss) per share are computed by dividing by the weighted average number of common shares outstanding during the year. Diluted net earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the effect of stock options and stock based awards (Note 4), plus the assumed conversion of convertible debt (Note 5).   

  

For the nine months ended September 30, 2018, the Company’s diluted loss per share is the same as the basic loss per share, and the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss. The Company has excluded 15,950,000 stock options and the shares issuable from convertible debt of $2,602,220, because their impact was anti-dilutive.

 

For the nine months ended September 30, 2017, the Company’s diluted loss per share is the same as the basic loss per share, and the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss. The Company has excluded 15,975,000 stock options and warrants of 245,000, and the shares issuable from convertible debt of $1,852,700, because their impact was anti-dilutive.

 

Fair Value of Financial Instruments

Fair Value of Financial Instruments, requires disclosure of the fair value information, whether recognized in the balance sheet, where it is practicable to estimate that value. As of September 30, 2018, the amounts reported for cash, inventory, prepaid expenses, accounts payable, and accrued expenses, approximate the fair value because of their short maturities.

 

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, 2018:

 

      Total     (Level 1)     (Level 2)     (Level 3)  
                           
  Derivative Liability   $ 25,056,739     $ -     $ -     $ 25,056,739  
  Total Liabilities measured at fair value   $ 25,056,739     $ -     $ -     $ 25,056,739  

 

6

 

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Fair Value of Financial Instruments (Continued)

The following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair value:

 

  Balance as of December 31, 2017   $ 5,239,073  
  Fair value of derivative liabilities issued     246,844  
  Loss on change in derivative liability     19,570,822  
  Balance as of September 30, 2018   $ 25,056,739  

 

Reclassification of expenses

During the three and nine month period ended September 30, 2017, certain reclassifications have been made to conform to the current period presentation. There is no material impact on any of the Company’s previously issued financial statements.

 

Recently Issued Accounting Pronouncements

In August 2017, FASB issued accounting standards update ASU-2017-12, “D” (Topic 815) – “Targeted Improvements to Accounting for Hedging Activities”, to require an entity to present the earnings effect of the hedging instrument in the same statement line item in which the earnings effect of the hedged item is reported. The amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods with the fiscal years beginning after December 15, 2020. Early adoption is permitted in any interim period after issuance of the update. The Company is currently evaluating the impact of the adoption of ASU 2017-12 on the Company’s financial statements.

  

In June 2018, FASB issued accounting standards update ASU 2018-07, (Topic 505) – “Shared-Based Payment Arrangements with Nonemployees”, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees will be aligned with the requirements for share-based payments granted to employees. Under the ASU 2018-07, the measurement of equity-classified nonemployee share-based payments will be fixed on the grant date, as defined in ASC 718, and will use the term nonemployee vesting period, rather than requisite service period. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted if financial statements have not yet been issued. The Company is currently evaluating the impact of the adoption of ASU 2018-07 on the Company’s financial statements.

 

In August 2018, the FASB issued to accounting standards update ASU 2018-13, (Topic 820) - “Fair Value Measurement”, which changes the unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance. The Company is currently evaluation the impact of the adoption of ASU 2018-13, on the Company’s financial statements.

 

Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements.

 

3. CAPITAL STOCK

 

During the nine months ended September 30, 2018, the Company issued 15,445,341 shares of common stock upon conversion of convertible promissory notes in the amount of $85,410, plus accrued interest of $30,370, with an aggregate fair value loss of $234,733 at prices ranging from $0.016 - $0.058.

  

4. STOCK OPTIONS

 

Stock Options

The Company did not grant any stock options during the nine months ended September 30, 2018 and 2017, respectively.

   

7

 

 

4. STOCK OPTIONS (Continued)

 

Stock Options (Continued)

 

      9/30/2018     9/30/2017  
      Number of Options     Weighted average exercise price     Number of Options     Weighted average exercise price  
  Outstanding as of the beginning of the periods     15,975,000     $ 0.23       15,975,000     $ 0.23  
  Granted     -       -       -       -  
  Exercised     -       -       -       -  
  Expired     (25,000 )   $ 0.40       -       -  
  Outstanding as of the end of the periods     15,950,000     $ 0.23       15,975,000     $ 0.23  
  Exercisable as of the end of the periods     15,950,000     $ 0.23       15,435,000     $ 0.23  

 

The weighted average remaining contractual life of options outstanding as of September 30, 2018 and 2017 was as follows:

 

9/30/2018     9/30/2017  
Exercisable
Price 		    Stock Options Outstanding     Stock Options Exercisable     Weighted Average Remaining Contractual Life (years)     Exercisable
Price 		    Stock Options Outstanding     Stock Options Exercisable     Weighted Average Remaining Contractual Life (years)  
                                $ 0.40       25,000       25,000       0.42  
$ 0.09       2,450,000       2,450,000       3.48     $ 0.09       2,450,000       2,450,000       4.48  
$ 0.26       13,500,000       13,500,000       3.93     $ 0.26       13,500,000       12,960,000       4.93  
          15,950,000       15,950,000                       15,975,000       15,435,000          

 

The stock-based compensation expense recognized in the statement of operations during the nine months ended September 30, 2018 and 2017, related to the granting of these options was $0 and $1,141,684, respectively.

 

As of September 30, 2018, and 2017, respectively, there was no intrinsic value with regards to the outstanding options.

   

5. CONVERTIBLE PROMISSORY NOTES

 

As of September 30, 2018, the outstanding convertible promissory notes net of debt discount are summarized as follows:

 

  Convertible Promissory Notes, net of debt discount   $ 2,409,683  
  Less current portion     203,725  
  Total long-term liabilities   $ 2,205,958  

 

Maturities of long-term debt for the next five years are as follows:

 

  September 30,   Amount  
  2020     631,220  
  2021     493,000  
  2022     694,738  
  2023     289,000  
  2024     98,000  
      $ 2,205,958  

 

At September 30, 2018, the $2,602,220 in convertible promissory notes had a remaining debt discount of $192,537, leaving a net balance of $2,409,683.

 

On May 2, 2014, the Company entered into a convertible promissory note with an investor, providing for the sale by the Company of 10% unsecured convertible note (the “May Note”) in the aggregate principal amount of up to $500,000, to be advanced in amounts at the lender’s discretion. Upon execution of the convertible promissory note, the Company received a tranche in the amount of $50,000. On various dates, the Company received additional tranches in the aggregate sum of $450,000, for a total aggregate sum of $500,000. As of September 30, 2018, the remaining principal balance was $221,220. During the nine months ended September 30, 2018, the Company issued 15,445,341 shares of common stock for principal in the amount of $85,410, plus accrued interest of $30,370, leaving a principal balance of $221,220. Each tranche matures eighteen (18) months from the effective date of each tranche, which was extended on January 12, 2016 to sixty (60) months, with maturity dates ranging from June 12, 2019 to December 21, 2019. The May Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of a) the lesser of $0.25 per share of common stock, b) fifty percent (50%) of the average three (3) lowest trading prices of three (3) separate trading days recorded after the effective date, or c) the lowest effective price granted to any person or entity after the effective date to acquire common stock. If the Borrower fails to deliver shares in accordance with the timeframe of three (3) business days, the Lender, at any time prior to selling all of those shares, may rescind any portion, in whole or in part of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned to the Principal Sum with the rescinded conversion shares returned to the Borrower. In addition, for each conversion, in the event that shares are not delivered by the fourth business day (inclusive of the day of conversion), a penalty of $1,500 per day shall be assessed for each day after the third business day (inclusive of the day of the conversion) until the shares are delivered. The fair value of the May Note has been determined by using the Binomial lattice formula with an expected life of sixty (60) months from the effective date of each tranche.

 

8

 

 

5. CONVERTIBLE PROMISSORY NOTES (Continued)

 

On January 30, 2015, the Company entered into a convertible promissory note with an investor, providing for the sale by the Company of a 10% unsecured convertible note (the “January Note”) in the aggregate principal amount of up to $500,000, to be advanced in amounts at the lender’s discretion. Upon execution of the convertible promissory note, the Company received a tranche in the amount of $50,000. On various dates, the Company received additional tranches in the aggregate sum of $450,000. The principal balance at September 30, 2018 was $500,000. Each tranche matured eighteen (18) months from the effective date of each tranche, which was extended on January 12, 2016 to sixty (60) months from the effective date of each tranche, with maturity dates ranging from January 29, 2020 to August 25, 2020. The January Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of a) the lesser of $0.15 per share of common stock, b) fifty percent (50%) of the lowest trade price recorded since the original effective date of the January Note, or c) the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. If the Borrower fails to deliver shares in accordance with the timeframe of three (3) business days, the Lender, at any time prior to selling all of those shares, may rescind any portion, in whole or in part of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned to the Principal Sum with the rescinded conversion shares returned to the Borrower. In addition, for each conversion, in the event that shares are not delivered by the fourth business day (inclusive of the day of conversion), a penalty of $1,500 per day shall be assessed for each day after the third business day (inclusive of the day of the conversion) until the shares are delivered. The fair value of the January Note has been determined by using the Binomial lattice formula with an expected life of sixty (60) months from the effective date of each tranche.

   

On October 1, 2015, the Company entered into a convertible promissory note with an investor, providing for the sale by the Company of a 10% unsecured convertible note (the “October Note”) in the aggregate principal amount of up to $500,000, to be advanced in amounts at the lender’s discretion. Upon execution of the convertible promissory note, the Company received a tranche in the amount of $90,000. On various dates, the Company received additional tranches in the aggregate sum of $395,000. The principal balance at September 30, 2018 was $485,000. Each tranche matures twelve (12) months from the effective date of each tranche, which was extended on October 13, 2016 to sixty (60) months from the effective date of each tranche, with maturity dates ranging from October 1, 2020 to March 9, 2021.The October Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of a) the lesser of $0.25 per share of common stock, b) fifty percent (50%) of the lowest trade price recorded since the original effective date of the October Note, or c) the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. If the Borrower fails to deliver shares in accordance with the timeframe of three (3) business days, the Lender, at any time prior to selling all of those shares, may rescind any portion, in whole or in part of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned to the Principal Sum with the rescinded conversion shares returned to the Borrower. In addition, for each conversion, in the event that shares are not delivered by the fourth business day (inclusive of the day of conversion), a penalty of $1,500 per day shall be assessed for each day after the third business day (inclusive of the day of the conversion) until the shares are delivered. The fair value of the January Note has been determined by using the Binomial lattice formula with an expected life of sixty (60) months from the effective date of each tranche. The fair value of the October Note has been determined by using the Binomial lattice formula with an expected life of twelve (12) months.

 

On April 5, 2016, the Company entered into a convertible promissory note with an investor, providing for the sale by the Company of a 10% unsecured convertible note (the “April Note”) in the aggregate principal amount of up to $500,000, to be advanced in amounts at the lender’s discretion. Upon execution of the convertible promissory notes, the Company received a tranche in the amount of $48,000. On various dates, the Company received additional tranches in the aggregate sum of $452,000. The principal balance at September 30, 2018 was $500,000. Each tranche matures twelve (12) months from its’ effective date of each tranche, which was extended on April 5, 2017 to sixty (60) months from the effective date of each tranche, with maturity dates ranging from April 8, 2021 to February 20, 2022. The April Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of a) the lesser of $0.13 per share of common stock, b) fifty percent (50%) of the lowest trade price recorded since the original effective date of the April Note, or c) the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. If the Borrower fails to deliver shares in accordance with the timeframe of three (3) business days, the Lender, at any time prior to selling all of those shares, may rescind any portion, in whole or in part of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned to the Principal Sum with the rescinded conversion shares returned to the Borrower. In addition, for each conversion, in the event that shares are not delivered by the fourth business day (inclusive of the day of conversion), a penalty of $1,500 per day shall be assessed for each day after the third business day (inclusive of the day of the conversion) until the shares are delivered. The fair value of the April Note has been determined by using the Binomial lattice formula with an expected life of twelve (12) months. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $351 during the nine months ended September 30, 2018.

 

9

 

 

5. CONVERTIBLE PROMISSORY NOTES (Continued)

 

On March 20, 2017, the Company entered into a convertible promissory note with an investor, providing for the sale by the Company of a 10% unsecured convertible note (the “March Note”) in the aggregate principal amount of up to $500,000, to be advanced in amounts at the lender’s discretion. Upon execution of the convertible promissory note, the Company received a tranche in the amount of $25,000. On various dates during the Company received additional tranches in the aggregate sum of $475,000. The principal balance as of September 30, 2018 was $500,000. Each tranche matures twelve (12) months from the effective date of each tranche, with an extension of sixty (60) months from each tranche. The March Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of a) the lesser of $0.13 per share of common stock, b) fifty percent (50%) of the lowest trade price recorded since the original effective date of the March Note, or c) the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. If the Borrower fails to deliver shares in accordance with the timeframe of three (3) business days, the Lender, at any time prior to selling all of those shares, may rescind any portion, in whole or in part of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned to the Principal Sum with the rescinded conversion shares returned to the Borrower. In addition, for each conversion, in the event that shares are not delivered by the fourth business day (inclusive of the day of conversion), a penalty of $1,500 per day shall be assessed for each day after the third business day (inclusive of the day of the conversion) until the shares are delivered. The fair value of the March Note has been determined by using the Binomial lattice formula with an expected life of twelve (12) months. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $5,447 during the nine months ended September 30, 2018.

    

On February 26, 2018, the Company entered into a convertible promissory note with an investor, providing for the sale by the Company of a 10% unsecured convertible note (the “February Note”) in the aggregate principal amount of up to $500,000, to be advanced in amounts at the lender’s discretion. Upon execution of the convertible promissory note, the Company received a tranche in the amount of $15,000. On various dates during the period ended September 30, 2018, Company received additional tranches in the aggregate sum of $265,000. The principal balance as of September 30, 2018 was $280,000. Each tranche matures twelve (12) months from the effective date of each tranche, with an extension of sixty (60) months from each tranche. The February Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of a) the lesser of $0.03 per share of common stock, b) fifty percent (50%) of the lowest trade price recorded since the original effective date of the February Note, or c) the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. If the Borrower fails to deliver shares in accordance with the timeframe of three (3) business days, the Lender, at any time prior to selling all of those shares, may rescind any portion, in whole or in part of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned to the Principal Sum with the rescinded conversion shares returned to the Borrower. In addition, for each conversion, in the event that shares are not delivered by the fourth business day (inclusive of the day of conversion), a penalty of $1,500 per day shall be assessed for each day after the third business day (inclusive of the day of the conversion) until the shares are delivered. The fair value of the February Note has been determined by using the Binomial lattice formula with an expected life of twelve (12) months. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $38,514 during the nine months ended September 30, 2018.

 

On July 23, 2018, the Company entered into a convertible promissory note with an investor, providing for the sale by the Company of a 10% unsecured convertible note (the “July Note”) in the aggregate principal amount of up to $63,000. The July Note matures on July 23, 2019. The July Note may be converted into shares of the Company’s common stock at a conversion price of sixty-one (61%) percent of the lowest average two (2) trading prices during the fifteen (15) trading day prior to the conversion date. The conversion feature of the July Note was considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the Note. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $11,910 during the nine months ended September 30, 2018. 

 

On September 4, 2018, the Company entered into a convertible promissory note with an investor, providing for the sale by the Company of a 10% unsecured convertible note (the “September Note”) in the aggregate principal amount of up to $53,000. The September Note matures on September 4, 2019. The September Note may be converted into shares of the Company’s common stock at a conversion price of sixty-one (61%) percent of the lowest average two (2) trading prices during the fifteen (15) trading day prior to the conversion date. The conversion feature of the July Note was considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the Note. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $3,775 during the nine months ended September 30, 2018. 

 

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 per the stock price fluctuations.

 

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6. DERIVATIVE LIABILITIES

 

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 per the stock price fluctuations.

 

The convertible notes issued and described in Note 5 do not have fixed settlement provisions because their conversion prices are not fixed. The conversion feature has been characterized as derivative liabilities to be re-measured at the end of every reporting period with the change in value reported in the statement of operations.

 

During the nine months ended September 30, 2018, as a result of the convertible notes (“Notes”) issued that were accounted for as derivative liabilities, we determined that the fair value of the conversion feature of the convertible notes at issuance was $246,843, based upon a Binomial-Model calculation. We recorded the full value of the derivative as a liability at issuance with an offset to valuation discount, which will be amortized over the life of the Notes.

 

During the nine months ended September 30, 2018, the Company converted $85,410 in principal of convertible notes, plus accrued interest of $30,370. As a result of the conversion of these notes the Company recorded a fair value loss on the settlement of debt in the amount of $234,733 in the statement of operations for the nine months ended September 30, 2018. At September 30, 2018, the fair value of the derivative liability was $25,056,739.

 

For purpose of determining the fair market value of the derivative liability for the embedded conversion, the Company used the Binomial lattice valuation model. The significant assumptions used in the Binomial lattice valuation model for the derivative are as follows:

 

      9/30/2018
  Risk free interest rate   2.19% - 2.94%
  Stock volatility factor   131.0% - 249.0%
  Weighted average expected option life   1 years - 5 years
  Expected dividend yield   None

   

7. SUBSEQUENT EVENT

 

Management has evaluated subsequent events according to the requirements of ASC TOPIC 855 and has determined that there are the following subsequent events:

 

On October 12, 2018, the Company issued 1,393,701 shares of common stock upon conversion of principal in the amount of $5,300, plus accrued interest of $2,156.

 

On October 12, 2018, the Company entered into a convertible promissory note with an investor, providing for the sale by the Company of a 10% unsecured convertible note (the “October 2018 Note”) in the principal amount of $53,000. The October 2018 Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of 61% of the average lowest two (2) trading prices for common stock during the fifteen (15) trading day period prior to the conversion date.

 

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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 “Management’s Discussion and Analysis or Plan of Operation” below, and elsewhere in this quarterly 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 quarterly 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 March 19, 2018, as amended March 20, 2018, 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 innovative technologies to increase the capacity and reduce the cost of storing electrical energy. We have previously developed an innovative material technology to reduce the cost per watt of electricity produced by Photovoltaic, or PV, solar modules.

 

We are currently working on a silicon anode additive material technology intended to drastically increase the storage capacity of current and future generation of lithium-ion batteries while lowering the cost of storing electrical energy. The lower cost of electrical energy storage will result in reduced cost per watt of electricity produced by PV solar modules as well.

 

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.

 

Recent Transactions

 

None.

 

Application of Critical Accounting Policies

 

Our discussion and analysis of our financial condition and results of operations are based upon our unaudited 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 a Binomial lattice valuation 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.  

 

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Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements, include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, derivative liabilities and the fair value of stock options. Actual results could differ from those 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 currently issued pronouncements during the nine months ended September 30, 2018, and does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed unaudited financial statements.

 

Results of Operations – Three Months Ended September 30, 2018 Compared to the Three Months Ended September 30, 2017

 

OPERATING EXPENSES  

 

General and Administrative Expenses

 

 General and administrative (“G&A”) expenses decreased by $331,882 to $107,200 for the three months ended September 30, 2018, compared to $439,082 for the prior period ended September 30, 2017. This decrease in G&A expenses was the result of a decrease in non-cash stock compensation expense of $370,657, with an increase in professional fees of $10,214, and an overall increase of $28,561 in other G&A expenses.

 

Research and Development

 

Research and Development (“R&D”) expenses increased by $5,380 to $90,886 for the three months ended September 30, 2018, compared to $85,506 for the prior period ended September 30, 2017. This overall increase in R&D expenses was the result of an increase in consulting services and services under the Sponsored Research Agreement with the North Carolina Agricultural and Technical State University.

 

 

Other Income/(Expenses)

 

Other income and (expenses) increased by $10,334,589 to $9,782,894 for the three months ended September 30, 2018, compared to $(551,695) for the prior period ended September 30, 2017. The increase in other income and (expenses) was the result of an increase in non-cash gain on change in fair value of the derivative instruments of $10,285,487, an increase in interest expense of $44,581, which includes non-cash expense of amortization of debt discount in the amount of $34,132, and a decrease in interest income of $2, with an decrease in fair value loss on settlement of debt of $93,685. The increase in other income and (expenses) was primarily due to the net change in the fair value of the derivative instruments and amortization of debt discount.

 

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Net Income (Loss)

 

Our net income for the three months ended September 30, 2018 was $9,583,571, compared to net loss of $(1,104,315) for the prior period ended September 30, 2017. The increase in net income was due to an increase in non-cash other income (expenses) associated with the net change in derivative instruments estimated each period. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility, variable conversion prices based on market prices as defined in the respective agreements and probabilities of certain outcomes based on management projections. These inputs are subject to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material. The Company has not generated any revenues. 

 

Results of Operations – Nine Months Ended September 30, 2018 Compared to the Nine Months Ended September 30, 2017

 

OPERATING EXPENSES

 

General and Administrative Expenses

 

 General and administrative (“G&A”) expenses decreased by $1,131,446 to $310,808 for the nine months ended September 30, 2018, compared to $1,442,254 for the prior period ended September 30, 2017. This decrease in G&A expenses was the result of a decrease in non-cash stock compensation expense of $1,141,684, with an increase in professional fees of $4,336, and an overall increase of $5,902 in other G&A expenses.

 

Research and Development

 

Research and Development (“R&D”) expenses increased by $67,262 to $184,327 for the nine months ended September 30, 2018, compared to $117,065 for the prior period ended September 30, 2017. This overall increase in R&D expenses was the result of an increase in consulting services and services under the Sponsored Research Agreement with the North Carolina Agricultural and Technical State University.

 

Other Income/(Expenses)

 

 Other income and (expenses) increased by $18,490,897 to $(20,046,320) for the nine months ended September 30, 2018, compared to $(1,555,423) for the prior period ended September 30, 2017. The increase in other income and (expenses) was the result of an increase in non-cash gain on change in fair value of the derivative instruments of $18,644,317, a decrease in interest expense of $49,512, which includes a decrease in non-cash expense of amortization of debt discount in the amount of $81,454, and a decrease in interest income of $11, with an decrease in fair value loss on settlement of debt of $103,919. The increase in other income and (expenses) was primarily due to the net change in the fair value of the derivative instruments and amortization of debt discount.

 

Net Income (Loss)

 

Our net loss for the nine months ended September 30, 2018 was $(20,546,035), compared to net loss of $(3,144,435) for the prior period ended September 30, 2017. The increase in net loss was due to an increase in non-cash other income (expenses) associated with the net change in derivative instruments estimated each period. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility, variable conversion prices based on market prices as defined in the respective agreements and probabilities of certain outcomes based on management projections. These inputs are subject to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material. The Company has not generated any revenues. 

 

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LIQUIDITY AND CAPITAL RESOURCES

 

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.

 

The unaudited condensed 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 unaudited condensed financial statements do not reflect any adjustments that might result if we are unable to continue as a going concern. During the nine months ended September 30, 2018, we did not generate any revenues, incurred a net loss of $20,546,035, due to an overall change in non-cash derivative liability, and used cash of $505,707 in operations. As of September 30, 2018, we had a working capital deficiency of $25,723,223 and a shareholders’ deficit of $27,850,057. These factors, among others, raise substantial doubt about our ability to continue as a going concern.

 

In the nine months ended September 30, 2018, we obtained funding through the sale of our securities. Management believes that we will be able to continue to raise funds through the sale of our securities to existing and new investors. Management believes that funding from existing and prospective new investors and future revenue will provide the additional cash needed to meet our obligations as they become due, and will allow the development of our core business operations.

 

As of September 30, 2018, we had a working capital deficit of $25,723,223 compared to a working capital deficit of $5,941,190 for the year ended December 31, 2017. This increase in working capital deficit of $19,782,033 was due primarily to a decrease in cash, and with an increase in prepaid expenses, accounts payable, accrued expenses, derivative liability associated with our outstanding notes, and an increase in the issuance of convertible promissory notes.

 

During the nine months ended September 30, 2018, we used $505,707 of cash for operating activities, as compared to $433,741 for the prior period ended September 30, 2017. The increase in the use of cash for operating activities for the current period was a result of an increase in research and development cost, and insurance expense, compared to the prior nine months ended September 30, 2017.

 

Cash used in investing activities for the nine months ended September 30, 2018 and 2017, were $5,770 and $699, respectively. The overall net change in investing activities was primarily due to an increase in the purchase of equipment in the current period.

 

Cash provided from financing activities was $494,000 for the nine months ended September 30, 2018, as compared to $357,000 for the prior period ended September 30, 2017. The increase was due to the issuance of additional convertible promissory notes during the current period. The convertible notes are convertible into shares of common stock, which have limitations on conversion. The lender is limited to no more than a 4.99% beneficial ownership of the outstanding shares of common stock. Beneficial ownership is determined in accordance with Section 13(d) of the Exchange Act of 1934, as amended. Our ability to continue as a going concern is dependent upon raising capital through financing transactions and future revenue. Our capital needs have primarily been met from the proceeds of the sale of our securities, as we currently have not generated any revenues. 

 

Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017, expressed substantial doubt about our ability to continue as a going concern. Our financial statements as of September 30, 2018 have been prepared under the assumption that we will continue as a going concern. Our ability to continue as a going concern ultimately is dependent upon 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 innovative technologies that increase the capacity and reduce the cost of storing electrical energy. We are currently focusing on developing a high capacity silicon anode material technology to increase the storage capacity and reduce cost of the current and future generation of lithium-ion batteries by 2019.  

 

Our plan of operation within the next three months is to utilize our cash balances to develop our silicon-based anode technology for high capacity, high density, and low cost Lithium-ion batteries.  We believe that our current cash and investment balances will be sufficient to support development activity and general and administrative expenses for the next three months. Management estimates that it will require additional cash resources during 2018, based upon its current operating plan and condition. We expect increased expenses during the fourth quarter of 2018 as we ramp up prototyping efforts for Lithium-ion batteries incorporating our electrode material.  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 fifteen 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.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  

As a smaller reporting company, as that term is defined in Item 10(f)(1) of Regulation S-K, we are not required to provide information required by this Item. 

 

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, or person performing similar functions, 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.

 

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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.

 

ITEM 1A. RISK FACTORS

 

 There are no material changes from the risk factors previously disclosed in the Registrant’s Form 10-K filed on March 19, 2018, as amended March 20, 2018.

 

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

 

None

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable

 

ITEM 5. OTHER INFORMATION

 

None

 

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ITEM 6. EXHIBITS

 

Exhibit No.   Description
     
10.1   Convertible Promissory Note dated October 12, 2018 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on October 17, 2018)
10.2   Securities Purchase Agreement dated October 12, 2018 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on October 17, 2018)
10.3   Convertible Promissory Note dated September 4, 2018. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on September 10, 2018)
     
10.4   Securities Purchase Agreement dated September 4, 2018. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on September 10, 2018)
     
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
     
EX-101.LAB   XBRL Taxonomy Extension Labels Linkbase
     
EX-101.PRE   XBRL Taxonomy Extension Presentation Linkbase

 

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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 November 6, 2018.

 

  BIOSOLAR, INC.
     
  By:  /s/ David Lee
   

Chief Executive Officer
(Principal Executive Officer) and
Acting Chief Financial Officer

(Principal Financial Officer and
Principal Accounting Officer)

 

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