NOTES
TO CONDENSED FINANCIAL STATEMENTS – UNAUDITED
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
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, 2020 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2020. 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, 2019.
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. No assurance
can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the
Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the
case of debt financing or cause substantial dilution for our stock holders, in case of equity financing.
|
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.
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 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.
|
|
Useful Lives
|
|
9/30/20
|
|
|
12/31/19
|
|
Patents
|
|
|
|
$
|
45,336
|
|
|
$
|
45,336
|
|
Less accumulated amortization
|
|
15 years
|
|
|
(14,356
|
)
|
|
|
(12,090
|
)
|
|
|
|
|
$
|
30,980
|
|
|
$
|
33,246
|
|
Amortization expense for the
nine months ended September 30, 2020 and the year ended December 31, 2019 was $2,266 and $1,511, respectively.
BIOSOLAR,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS – UNAUDITED
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
|
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, 2020, 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, 2020, 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 included 15,950,000 stock options and the shares issuable from convertible debt of $2,759,704, because their impact was dilutive.
For
the nine months ended September 30, 2019, 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.
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, 2020, 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.
|
BIOSOLAR,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS – UNAUDITED
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
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, 2020:
|
|
Total
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liability
|
|
$
|
25,261,322
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
25,261,322
|
|
Total Liabilities measured at fair value
|
|
$
|
25,261,322
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
25,261,322
|
|
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, 2019
|
|
$
|
8,919,202
|
|
Fair value of derivative liabilities issued
|
|
|
478,000
|
|
Loss on change in derivative liability
|
|
|
15,864,120
|
|
Balance as of September 30, 2020
|
|
$
|
25,261,322
|
|
Recently
Issued Accounting Pronouncements
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.
During the nine months ended
September 30, 2020, the Company issued 235,197,440 shares of common stock upon conversion of convertible promissory notes in the
amount of $572,329, plus accrued interest of $61,115, and other fees of $4,750 at prices ranging from $0.00140 - $0.0285. The Company
had no gain or loss upon conversion, since the conversions were made under the terms of the agreements.
During
the nine months ended September 30, 2019, the Company issued 50,016,700 shares of common stock upon conversion of convertible
promissory notes in the amount of $431,875, plus accrued interest of $53,083, with an aggregate fair value loss on conversion
of $789,084 at prices ranging from $0.0192 - $0.0437.
Stock
Options
The
Company did not grant any stock options during the three months ended September 30, 2020 and 2019, respectively.
|
|
9/30/2020
|
|
|
9/30/2019
|
|
|
|
Number
of
Options
|
|
|
Weighted
average
exercise
price
|
|
|
Number
of
Options
|
|
|
Weighted
average
exercise
price
|
|
Outstanding as of the beginning of the periods
|
|
|
15,950,000
|
|
|
$
|
0.23
|
|
|
|
15,950,000
|
|
|
$
|
0.23
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of the end of the periods
|
|
|
15,950,000
|
|
|
$
|
0.23
|
|
|
|
15,950,000
|
|
|
$
|
0.23
|
|
Exercisable as of the end of the periods
|
|
|
15,950,000
|
|
|
$
|
0.23
|
|
|
|
15,950,000
|
|
|
$
|
0.23
|
|
BIOSOLAR,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS – UNAUDITED
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
|
4.
|
STOCK
OPTIONS (Continues)
|
The
weighted average remaining contractual life of options outstanding as of September 30, 2020 and 2019 was as follows:
9/30/2020
|
|
|
9/30/2019
|
|
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)
|
|
$
|
0.09
|
|
|
|
2,450,000
|
|
|
|
2,450,000
|
|
|
|
1.73
|
|
|
$
|
0.09
|
|
|
|
2,450,000
|
|
|
|
2,450,000
|
|
|
|
2.73
|
|
$
|
0.26
|
|
|
|
13,500,000
|
|
|
|
13,500,000
|
|
|
|
2.18
|
|
|
$
|
0.26
|
|
|
|
13,500,000
|
|
|
|
13,500,000
|
|
|
|
3.18
|
|
|
|
|
|
|
15,950,000
|
|
|
|
15,950,000
|
|
|
|
|
|
|
|
|
|
|
|
15,950,000
|
|
|
|
15,950,000
|
|
|
|
|
|
The
stock-based compensation expense recognized in the statement of operations during the nine months ended September 30, 2020 and
2019, related to the granting of these options was $0 and $0, respectively.
As
of September 30, 2020 and 2019, respectively, there was no intrinsic value with regards to the outstanding options.
|
5.
|
CONVERTIBLE
PROMISSORY NOTES
|
As
of September 30, 2020, the outstanding convertible promissory notes net of debt discount are summarized as follows:
Convertible Promissory Notes, net of debt discount
|
|
$
|
2,487,888
|
|
Less current portion
|
|
|
946,008
|
|
Total long-term liabilities
|
|
$
|
1,541,880
|
|
Maturities
of long-term debt, net of debt discount for the next four years are as follows:
June 30,
|
|
Amount
|
|
2021
|
|
|
1,217,824
|
|
2022
|
|
|
473,880
|
|
2023
|
|
|
993,000
|
|
2024
|
|
|
75,000
|
|
|
|
$
|
2,759,704
|
|
At
September 30, 2020, the Company had outstanding convertible promissory notes in the amount of $2,759,704, which had a remaining
debt discount of $271,816, leaving a net balance of $2,487,888.
The
Company issued an unsecured convertible promissory note (the “May 2014 Note”), in the amount of $500,000 on May 2,
2014, the effective date. The May Note shall mature on May 2, 2022. The May 2014 Note bears interest at 10% per annum. The May
2014 Note is convertible into shares of the Company’s common stock at a conversion price of the lesser of a) $0.25 per share
of common stock (subject to adjustment for stock splits, dividends, combinations and other similar transactions) or 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 time frame 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 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 2014 Note has been determined by using the Binomial lattice formula
from the effective date of each tranche. During the nine months ended September 30, 2020, the Company issued 64,094,322 shares
of common stock upon conversion of principal in the amount of $63,270, plus accrued interest of $34,963. The May 2014 Note was
converted based on the terms of the agreement, and the Company did not recognize a gain or loss on the conversion in the financials.
As of September 30, 2020, the remaining balance of the May 2014 Note was $34,880.
BIOSOLAR,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS – UNAUDITED
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
|
5.
|
CONVERTIBLE
PROMISSORY NOTES (Continued)
|
The
Company issued various unsecured convertible promissory notes (the “2015-2018 Notes”) in the aggregate amount of $2,500,000
on various dates from January 30, 2015 through January 17, 2019, the effective dates. The maturity dates of the 2015-2018 Notes
were extended, and as result, mature on dates from January 30, 2023 thru January 17, 2024. The 2015-2018 Notes bear an interest
rate of 10% per annum. The 2015-2018 Notes are convertible into shares of the Company’s common stock at conversion prices
ranging from the a) the lesser of $0.03 to $0.25 per share of common stock (subject to adjustment for stock splits, dividends,
combinations and other similar transactions) or b) fifty percent (50%) of the lowest trade price recorded since the original effective
date, 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 within the time frame 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 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 2015-2018 Notes have been determined by using
the Binomial lattice formula from the effective date of each tranche. The Company recorded amortization of debt discount, which
was recognized as interest expense in the amount of $801 during the nine months ended September 30, 2020. As of September 30,
2020, the 2015-2018 Notes had a remaining aggregate balance of $2,340,000.
The
Company issued various unsecured convertible promissory notes (the “Feb-Apr 2019 Notes”) in the aggregate principal
amount of $107,000. The Company paid an original issue discount of $4,000 and received funds in the amount of $103,000. The Feb
2019 tranche was extended to August 22, 2020. The Apr 2019 Note matures on October 11, 2020. The Feb-Apr 2019 Notes bear interest
at 10% per annum. The Feb-Apr 2019 Notes may be converted into shares of the Company’s common stock at a conversion price
of sixty-one (61%) percent of the lowest one (1) day trading price during the fifteen (15)-trading-day period prior to the conversion
date. The parties agree that if the shares of common stock issuable upon conversion of these Feb-Apr 2019 Notes are not delivered
by the deadline, the Borrower shall pay to the holder of the Feb-Apr 2019 Notes $2,000 per day in cash, for each day beyond the
deadline that the Borrower fails to deliver such common stock. The conversion feature of the Feb-Apr 2019 Notes was considered
a derivative in accordance with current accounting guidelines because of the reset conversion features of the Feb-Apr 2019 Notes.
The fair value of the Feb-Apr 2019 Notes has been determined by using the Binomial lattice formula from the effective date of
the notes. During the period ended September 30, 2020, the Company issued 34,267,881 shares of common stock upon conversion of
$72,384 in principal, accrued interest of $6,351 and $1,750 in other fees. The Feb-Apr 2019 Notes were converted based on the
terms of the agreement and the Company did not recognized a gain or loss on conversion in the financials. The Company recorded
amortization of debt discount, which was recognized as interest expense in the amount of $21,801 during the nine months ended
September 30, 2020. The Feb-Apr 2019 Notes was fully converted as of September 30, 2020.
The
Company issued an unsecured convertible promissory note on July 16, 2019 (the “July 2019 Note”), in the aggregate
principal amount of $53,000. The Company paid an original issue discount of $3,000 and received funds in the amount of $50,000.
The July 2019 Note matured on July 16, 2020. The July 2019 Note bears interest at 10% per annum. The July 2019 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)
day closing bid prices during the fifteen (15) trading days prior to the conversion date. The parties agree that if shares of
the common stock issuable upon conversion of these Notes are not delivered by the deadline, the Borrower shall pay to the Holder
$2,000 per day in cash, for each day beyond the deadline that the Borrower fails to deliver such common stock. The conversion
feature of the July 2019 Note was considered a derivative in accordance with current accounting guidelines because of the reset
conversion features of the July 2019 Note. The fair value of the July 2019 Notes has been determined by using the Binomial lattice
formula from the effective date of the notes. During the period ended September 30, 2020, the Company issued 8,248,918 shares
of common stock upon conversion of principal in the amount of $53,000, plus interest of $2,650. The July 2019 Note was converted
based on the terms of the agreement, and the Company did not recognize a gain or loss on conversion in the financials. The Company
recorded amortization of debt discount, which was recognized as interest expense in the amount of $28,672 during the nine months
ended September 30, 2020. The July 2019 Note was fully converted as of September 30, 2020.
The
Company issued an unsecured convertible promissory note on August 8, 2019 (the “August 2019 Note”), in the aggregate
principal amount of $53,500. The Company paid an original issue discount of $2,000 and received funds in the amount of $51,500.
The August 2019 Note shall mature on February 14, 2021. The August 2019 Note bears interest at 10% per annum. The August 2019
Note may be converted into shares of the Company’s common stock at a conversion price of sixty-one (61%) percent of the
lowest one (1) day trading price or lowest bid price during the fifteen (15) trading days prior to the conversion date. The parties
agree that if shares of the common stock issuable upon conversion of these Notes are not delivered by the deadline, the Borrower
shall pay to the Holder $2,000 per day in cash, for each day beyond the deadline that the Borrower fails to deliver such common
stock. The conversion feature of the August 2019 Note was considered a derivative in accordance with current accounting guidelines
because of the reset conversion features of the August 2019 Note. The fair value of the August 2019 Notes has been determined
by using the Binomial lattice formula from the effective date of the notes. The Company issued 21,000,000 shares of common stock
upon conversion of principal in the amount of $40,676, plus other fees of $3,000. The August 2019 Note was converted based on
the terms of the agreement and the Company did not recognize a gain or loss on conversion in the financials. The Company recorded
amortization of debt discount, which was recognized as interest expense in the amount of $32,305 during the nine months ended
September 30, 2020. The August 2019 Note as of September 30, 2020 had a remaining balance of $12,824.
BIOSOLAR,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS – UNAUDITED
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
|
5.
|
CONVERTIBLE
PROMISSORY NOTES (Continued)
|
The
Company issued an unsecured convertible promissory note on August 29, 2019 (the “August 29, 2019 Note”), in the aggregate
principal amount of $63,000. The Company paid an original issue discount of $3,000 and received funds in the amount of $60,000.
The August 29, 2019 Note matures on August 29, 2020. The August 29, 2019 Note bears an interest at 10% per annum. The August 29,
2019 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) day closing bid prices during the fifteen (15) trading days prior to the conversion date. The parties
agree that if shares of the common stock issuable upon conversion of these Notes are not delivered by the deadline, the Borrower
shall pay to the Holder $2,000 per day in cash, for each day beyond the deadline that the Borrower fails to deliver such common
stock. The conversion feature of the August 29, 2019 Note was considered a derivative in accordance with current accounting guidelines
because of the reset conversion features of the August 29, 2019 Note. The fair value of the August 29, 2019 Note has been determined
by using the Binomial lattice formula from the effective date of the notes. During the nine months ended September 30, 2020, the
Company issued 13,624,762 shares of common stock upon conversion in principal of $63,000, plus accrued interest of $3,150. The
August 2019 Note was converted based on the terms of the agreement and the Company did not recognize a gain or loss on conversion
in the financials. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount
of $24,408 during the nine months ended September 30, 2020. The August 2019 Note was fully converted as of September 30,
2020.
The
Company issued an unsecured convertible promissory note on October 1, 2019 (the “Oct 2019 Note”), in the aggregate
principal amount of $63,000. The Company paid an original issue discount of $3,000 and received funds in the amount of $60,000.
The October 1, 2019 Note matures on October 1, 2020. The Oct 2019 Note bears interest at 10% per annum. The Oct 2019 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) day closing bid prices during the fifteen (15) trading days prior to the conversion date. The parties agree that if shares
of the common stock issuable upon conversion of these Notes are not delivered by the deadline, the Borrower shall pay to the Holder
$2,000 per day in cash, for each day beyond the deadline that the Borrower fails to deliver such common stock. The conversion
feature of the Oct 2019 Note was considered a derivative in accordance with current accounting guidelines because of the reset
conversion features of the Oct 2019 Note. The fair value of the Oct 2019 Note has been determined by using the Binomial lattice
formula from the effective date of the notes. During the nine months ended September 30, 2020, the Company issued 28,413,462 shares
of common stock upon conversion of principal of $63,000, plus accrued interest of $3,150. The Oct 2019 Note was converted based
on the terms of the agreement and the Company did not recognized a gain or loss on conversion in the financials. The Company recorded
amortization of debt discount, which was recognized as interest expense in the amount of $47,336 during the nine months ended
September 30, 2020. The Oct 2019 Note was fully converted as of September 30, 2020.
The
Company issued an unsecured convertible promissory note on November 4, 2019 (the “Nov 2019 Note”), in the aggregate
principal amount of $58,000. The Company paid an original issue discount of $3,000 and received funds in the amount of $55,000.
The November 4, 2019 Note matures on November 4, 2020. The Nov 2019 Note bears interest at 10% per annum. The Nov 2019 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) day closing bid prices during the fifteen (15) trading days prior to the conversion date. The parties agree that if the
shares of the common stock issuable upon conversion of these Notes are not delivered by the deadline, the Borrower shall pay to
the Holder $2,000 per day in cash, for each day beyond the deadline that the Borrower fails to deliver such common stock. The
conversion feature of the Nov 2019 Note was considered a derivative in accordance with current accounting guidelines because of
the reset conversion features of the Nov 2019 Note. The fair value of the Nov 2019 Note has been determined by using the Binomial
lattice formula from the effective date of the notes. During the nine months ended September 30, 2020, the Company issued 24,588,385
shares of common stock upon conversion of $58,000 in principal, plus accrued interest of $ 2,900. The Nov 2019 Note was converted
based on the terms of the agreement and the Company did not recognize a gain or loss on conversion in the financials. The Company
recorded amortization of debt discount, which was recognized as interest expense in the amount of $48,967 during the nine months
ended September 30, 2020. The Nov 2019 Note was fully converted as of September 30, 2020.
The
Company issued an unsecured convertible promissory note on December 20, 2019 (the “Dec 2019 Note”), in the aggregate
principal amount of $53,000. The Company paid an original issue discount of $3,000 and received funds in the amount of $50,000.
The December 20, 2019 Note matures on December 20, 2020. The Dec 2019 Note bears an interest at 10% per annum. The Dec 2019 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) day closing bid prices during the fifteen (15) trading days prior to the conversion date. The parties agree that
if the shares of the common stock issuable upon conversion of these Notes are not delivered by the deadline, the Borrower shall
pay to the Holder $2,000 per day in cash, for each day beyond the deadline that the Borrower fails to deliver such common stock.
The conversion feature of the Dec 2019 Note was considered a derivative in accordance with current accounting guidelines because
of the reset conversion features of the Dec 2019 Note. The fair value of the Dec 2019 Note has been determined by using the Binomial
lattice formula from the effective date of the notes. During the nine months ended September 30, 2020, the Company issued 21,118,946
shares of common stock upon the conversion of principal of $53,000, plus accrued interest of $2,650. The Dec 2019 Note was converted
based on the terms of the agreement and the Company did not recognize a gain or loss on the conversion in the financials. The
Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $51,407 during the nine
months ended September 30, 2020. The Dec 2019 Note was fully converted as of September 30, 2020.
BIOSOLAR,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS – UNAUDITED
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
|
5.
|
CONVERTIBLE
PROMISSORY NOTES (Continued)
|
The
Company issued an unsecured convertible promissory note on January 23, 2020 (the “Jan 2020 Note”), in the aggregate
principal amount of $53,000. The Company paid an original issue discount of $3,000 and received funds in the amount of $50,000.
The January 23, 2020 Note matures on January 23, 2021. The Jan 2020 Note bears interest at 10% per annum. The Jan 2020 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) day closing bid prices during the fifteen (15) trading days prior to the conversion date. The parties agree that if the
shares of the common stock issuable upon conversion of these Notes are not delivered by the deadline, the Borrower shall pay to
the Holder $2,000 per day in cash, for each day beyond the deadline that the Borrower fails to deliver such common stock. The
conversion feature of the Jan 2020 Note was considered a derivative in accordance with current accounting guidelines because of
the reset conversion features of the Jan 2020 Note. The fair value of the Jan 2020 Note has been determined by using the Binomial
lattice formula from the effective date of the notes. During the nine months ended September 30, 2020, the Company issued 12,320,494
of common stock upon conversion of $53,000 in principal, plus accrued interest of $2,650. The Jan 2020 Note was converted based
on the terms of the agreement and the Company did not recognize a gain or loss on the conversion in the financials. The Company
recorded amortization of debt discount, which was recognized as interest expense in the amount of $53,000 during the nine months
ended September 30, 2020. The Jan 2020 Note was fully converted as of September 30, 2020.
The
Company issued an unsecured convertible promissory note on February 13, 2020 (the “Feb 2020 Note”), in the aggregate
principal amount of $53,500. The Company paid an original issue discount of $2,000 and received funds in the amount of $51,500.
The Feb 2020 Note matures on February 13, 2021. The Feb 2020 Note bears interest at 10% per annum. The Feb 2020 Note may be converted
into shares of the Company’s common stock at a conversion price of sixty-one (61%) percent of the lowest one (1) day trading
price or lowest bid price during the fifteen (15) trading days prior to the conversion date. The parties agree that if the shares
of the common stock issuable upon conversion of these Notes are not delivered by the deadline, the Borrower shall pay to the Holder
$2,000 per day in cash, for each day beyond the deadline that the Borrower fails to deliver such common stock. The conversion
feature of the Feb 2020 Note was considered a derivative in accordance with current accounting guidelines because of the reset
conversion features of the Feb 2020 Note. The fair value of the Feb 2020 Note has been determined by using the Binomial lattice
formula from the effective date of the notes. The Company recorded amortization of debt discount, which was recognized as interest
expense in the amount of $33,474 during the nine months ended September 30, 2020. The Feb 2020 Note as of September 30, 2020
had a remaining balance of $53,500.
The
Company issued an unsecured convertible promissory note on March 2, 2020 (the “Mar 2020 Note”), in the aggregate principal
amount of $53,000. The Company paid an original issue discount of $3,000 and received funds in the amount of $50,000. The March
2, 2020 Note matures on March 2, 2021. The Mar 2020 Note bears interest at 10% per annum. The Mar 2020 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) day
closing bid prices during the fifteen (15) trading days prior to the conversion date. The parties agree that if the shares of
the common stock issuable upon conversion of these Notes are not delivered by the deadline, the Borrower shall pay to the Holder
$2,000 per day in cash, for each day beyond the deadline that the Borrower fails to deliver such common stock. The conversion
feature of the Mar 2020 Note was considered a derivative in accordance with current accounting guidelines because of the reset
conversion features of the Mar 2020 Note. The fair value of the Mar 2020 Note has been determined by using the Binomial lattice
formula from the effective date of the notes. During the nine months ended September 30, 2020, the Company issued 7,520,270 shares
of common stock upon conversion in principal of $53,000, plus accrued interest of $2,650. The Mar 2020 Note was converted based
on the terms of the agreement and the Company did not recognize a gain or loss on the conversion in the financials. The Company
recorded amortization of debt discount, which was recognized as interest expense in the amount of $53,000 during the nine months
ended September 30, 2020. The Mar 2020 Note was fully converted as of September 30, 2020.
The Company issued an unsecured
convertible promissory note on April 28, 2020 (the “Apr 2020 Note”), in the aggregate principal amount of $53,000.
The Company paid an original issue discount of $3,000 and received funds in the amount of $50,000. The April 28, 2020 Note matures
on April 28, 2021. The Apr 2020 Note bears interest at 10% per annum. The Apr 2020 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) day closing bid prices during the
fifteen (15) trading days prior to the conversion date. The parties agree that if the shares of the common stock issuable upon
conversion of these Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day in cash, for
each day beyond the deadline that the Borrower fails to deliver such common stock. The conversion feature of the Apr 2020 Note
was considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the Apr
2020 Note. The fair value of the Apr 2020 Note has been determined by using the Binomial lattice formula from the effective date
of the notes. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $22,507
during the nine months ended September 30, 2020. The Apr 2020 Note as of September 30, 2020 had a remaining balance of $53,000.
BIOSOLAR,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS – UNAUDITED
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
|
5.
|
CONVERTIBLE
PROMISSORY NOTES (Continued)
|
The
Company issued an unsecured convertible promissory note on June 22, 2020 (the Jun 2020 Note), in the aggregate principal amount
of $53,000. The Company paid an original issue discount of $3,000 and received funds in the amount of $50,000. The June 22, 2020
Note matures on June 22, 2021. The Jun 2020 Note bears interest at 10% per annum. The Jun 2020 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) day closing
bid prices during the fifteen (15) trading days prior to the conversion date. The parties agree that if delivery of the common
stock issuable upon conversion of these Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per
day in cash, for each day beyond the deadline that the Borrower fails to deliver such common stock. The conversion feature of
the Jun 2020 Note was considered a derivative in accordance with current accounting guidelines because of the reset conversion
features of the Jun 2020 Note. The fair value of the Jun 2020 Note has been determined by using the Binomial lattice formula from
the effective date of the notes. The Company recorded amortization of debt discount, which was recognized as interest expense
in the amount of $14,521 during the nine months ended September 30, 2020. The Jun 2020 Note as of September 30, 2020 had
a remaining balance of $53,000.
The
Company issued an unsecured convertible promissory note on July 6, 2020 (the Jul 2020 Note), in the aggregate principal amount
of $53,000. The Company paid an original issue discount of $3,000 and received funds in the amount of $50,000. The Jul 2020 Note
matures on July 6, 2021. The Jul 2020 Note bears interest at 10% per annum. The Jul 2020 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) day closing bid
prices during the fifteen (15) trading days prior to the conversion date. The parties agree that if delivery of the common stock
issuable upon conversion of these Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day
in cash, for each day beyond the deadline that the Borrower fails to deliver such common stock. The conversion feature of the
Jul 2020 Note was considered a derivative in accordance with current accounting guidelines because of the reset conversion features
of the Jul 2020 Note. The fair value of the Jul 2020 Note has been determined by using the Binomial lattice formula from the effective
date of the notes. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount
of $12,488 during the nine months ended September 30, 2020. The Jul 2020 Note as of September 30, 2020 had a remaining balance
of $53,000.
The
Company issued an unsecured convertible promissory note on August 4, 2020 (the Aug 2020 Note), in the aggregate principal amount
of $53,000. The Company paid an original issue discount of $3,000 and received funds in the amount of $50,000. The August 4, 2020
Note matures on August 4, 2021. The Aug 2020 Note bears interest at 10% per annum. The Aug 2020 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) day closing
bid prices during the fifteen (15) trading days prior to the conversion date. The parties agree that if delivery of the common
stock issuable upon conversion of these Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per
day in cash, for each day beyond the deadline that the Borrower fails to deliver such common stock. The conversion feature of
the Aug 2020 Note was considered a derivative in accordance with current accounting guidelines because of the reset conversion
features of the Aug 2020 Note. The fair value of the Aug 2020 Note has been determined by using the Binomial lattice formula from
the effective date of the notes. The Company recorded amortization of debt discount, which was recognized as interest expense
in the amount of $8,422 during the nine months ended September 30, 2020. The Aug 2020 Note as of September 30, 2020 had a
remaining balance of $53,000.
The Company issued an unsecured
convertible promissory note on August 17, 2020 (the “Aug 2020 Note”), in the aggregate principal amount of $53,500.
The Company paid an original issue discount of $2,000 and received funds in the amount of $51,500. The Aug 2020 Note matures on
August 17, 2021. The Aug 2020 Note bears interest at 10% per annum. The Aug 2020 Note may be converted into shares of the Company’s
common stock at a conversion price of sixty-one (61%) percent of the lowest one (1) day trading price or lowest bid price during
the fifteen (15) trading days prior to the conversion date. The parties agree that if the shares of the common stock issuable upon
conversion of these Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day in cash, for each
day beyond the deadline that the Borrower fails to deliver such common stock. The conversion feature of the Aug 2020 Note was considered
a derivative in accordance with current accounting guidelines because of the reset conversion features of the Aug 2020 Note. The
fair value of the Aug 2020 Note has been determined by using the Binomial lattice formula from the effective date of the notes.
The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $33,474 during the
nine months ended September 30, 2020. The Aug 2020 Note as of September 30, 2020 had a remaining balance of $53,500.
The Company issued an unsecured
convertible promissory note on September 14, 2020 (the Sep 2020 Note), in the aggregate principal amount of $53,000. The Company
paid an original issue discount of $3,000 and received funds in the amount of $50,000. The September 14, 2020 Note matures on September
14, 2021. The Sep 2020 Note bears interest at 10% per annum. The Sep 2020 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) day closing bid prices during the fifteen
(15) trading days prior to the conversion date. The parties agree that if delivery of the common stock issuable upon conversion
of these Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond
the deadline that the Borrower fails to deliver such common stock. The conversion feature of the Sep 2020 Note was considered a
derivative in accordance with current accounting guidelines because of the reset conversion features of the Sep 2020 Note. The
fair value of the Sep 2020 Note has been determined by using the Binomial lattice formula from the effective date of the notes.
The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $8,422 during the
nine months ended September 30, 2020. The Sep 2020 Note as of September 30, 2020 had a remaining balance of $53,000.
BIOSOLAR,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS – UNAUDITED
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
|
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, 2020, 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 $478,000, 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, 2020, the Company converted $572,329 in principal of convertible notes, plus accrued interest of $61,115, and other
fees of $4,750. At September 30, 2020, the fair value of the derivative liability was $25,261,322.
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:
|
|
9/30/2020
|
|
|
|
|
|
|
Risk
free interest rate
|
|
|
0.12%
- 0.28%
|
|
Stock
volatility factor
|
|
|
153.0%
-246.0%
|
|
Weighted
average expected option life
|
|
|
6
months - 5 years
|
|
Expected
dividend yield
|
|
|
None
|
|
|
7.
|
COMMITMENTS
AND CONTINGENCIES
|
The
Company rents office space on a yearly basis with a monthly rent payment in the amount of $550.
In
the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising. Such matters
are subject to many uncertainties, and outcomes are not predictable with assurance. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the Company’s financial position or results of operations.
At
September 30, 2020, there were no legal proceedings against the Company.
BIOSOLAR,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS – UNAUDITED
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
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 8, 2020 the Company issued 17,171,727 shares of common stock upon conversion of principal in the amount of $15,940, plus
accrued interest of $9,245 according to the conditions of the convertible note dated as of May 2, 2014.
On
October 12, 2020, an addendum was executed for the Bountiful convertible note dated October 1, 2015, to extend the maturity date
to October 1, 2023.
On
October 13, 2020, the Company received funds of $25,000 on the convertible note dated February 26, 2018.
On
October 28, 2020 the Company issued 3,921,569 shares of common stock upon conversion of principal in the amount of $20,000 according
to the conditions of the convertible note dated as of April 23, 2020.
On
October 30, 2020 the Company issued 8,695,122 shares of common stock upon conversion of principal in the amount of $33,000, plus
accrued interest of $2,650 according to the conditions of the convertible note dated as of April 23, 2020.
On November
2, 2020, the Company entered into a securities purchase agreement in the amount of $53,000 less other fees of $3,000 for net funds
of $50,000.