☒ ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Indicate by check mark
whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No
☒
Indicate by check mark
if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No
☒
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 and post such files). Yes ☒ No ☐
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company
or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,”, “small
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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 pursuant to Section 13(a) of the Exchange 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 aggregate market
value of the voting and non-voting common stock of the issuer held by non-affiliates, computed by reference to the price at which
the common stock was sold on June 30, 2020, was approximately $1,250,846.
The number of shares of the registrant’s
common stock outstanding, as of February 12, 2021 was 528,062,717.
PART I
Overview
We are a developer of
clean energy technologies. Our current focus is on developing an electrolyzer technology to lower the cost of Green Hydrogen production.
Hydrogen is the cleanest
and most abundant fuel in the universe. It is a zero-emission fuel and only produces water vapor when used. However, hydrogen does
not exist in its pure form on Earth so it must be extracted. For centuries, scientists have known how to use electricity to split
water into hydrogen and oxygen using a device called an electrolyzer. Electrolyzers installed behind a solar farm or wind farm
can use renewable electricity to split water, thereby producing Green Hydrogen. However, modern electrolyzers still cost too much.
The chemical catalysts that enable the water-splitting reactions are currently made from platinum and iridium – both of which
are very expensive precious metals. These catalysts account for nearly 50% of the cost of the electrolyzer.
We are developing technologies
to significantly reduce or replace rare earth materials with inexpensive earth abundant materials in electrolyzers to help usher
in a Green Hydrogen economy. In a 2020 report, Goldman Sachs estimates that Green Hydrogen will be a $12 trillion market opportunity
by 2050.
We are also developing
innovative technologies to increase the storage capacity, lower the cost and extend the life of lithium-ion batteries for electric
vehicles (EV). 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 material technology intended to reduce the cost
of current and future generation of lithium-ion batteries for EVs.
Industry Overview
Hydrogen is the most abundant and prevalent
clean energy in the universe. 73% of the Sun is made up of hydrogen.
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On a weight basis, hydrogen (142 MJ/kg) contains 3X as much energy as gasoline (46 MJ/kg), and 200X as much energy as lithium-ion batteries (0.6 MJ/kg).
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It can be used in fuel cells to power electric vehicles or cities.
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It can be combusted in gas turbines or internal combustion engines for power generation.
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It is a zero-emission clean fuel and produces only water vapor when used.
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It is the main ingredient in fertilizers that feed our hungry world.
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Hydrogen doesn’t
exist in its pure form, so it must be extracted. According to a 2020 report from the U.S. Department of Energy, more
than 98% of hydrogen in the world is made by steam reforming of natural gas (“Grey Hydrogen”) or
coal gasification (“Brown Hydrogen”). Both sources of hydrogen are basically different forms of dirty,
carbon heavy, and non-renewable fossil fuels. This does little to help fight climate change or lead to renewable
energy and a sustainable planet.
According to a 2020
research report from Grand View Research, hydrogen is already a big business with an annual market size of more than $117 billion
in 2019. Developing cost-competitive Green Hydrogen made from renewable resources such as solar, wind and water
can significantly expand the market for hydrogen. At this time, electrolyzer technology represents the most certain way
forward.
Solar or Wind Energy + Water + Electrolyzers
= Green Hydrogen
Abundant sources of
Green Hydrogen can then power a clean energy world of fast charging fuel cell electric vehicles,
light up our homes, make our fertilizers and ultimately replace many forms of fossil fuels.
An
overwhelming amount of scientific evidence shows that carbon emissions from fossil fuels have contributed to increasing global
climate change. Policymakers around the world have accelerated programs to enable the development and adoption of renewable energy.
The U.S has been slow to adopt such programs but is quickly becoming a formidable force. According to the World Resources Institute,
more than 14 U.S. states have legislative mandates requiring 100% renewable electricity, some as early as 2040. Both the U.K. and
European Union are targeting net zero greenhouse gas emissions by 2050.
With this global backdrop
and concerted actions toward climate policies and clean energy, we believe the Green Hydrogen revolution is ready to take off.
The Sun doesn’t always shine, and the wind doesn’t always blow. Therefore, green energy from solar and wind power is
inherently intermittent and unreliable as a primary source of power. However, by converting that green electricity into Green Hydrogen,
and it can be used anywhere and anytime for electricity, chemicals, heating and all necessities of life.
Because of the versatility
of hydrogen, Green Hydrogen has the potential to fundamentally improve the world economy and usher in a new era of economic prosperity,
sustainability, and energy independence to those with access to solar, wind and water… which describes most of the entire
world.
In a 2020 report, Bank
of America said that hydrogen will take 25% of all oil demand by 2050 and that the Green Hydrogen economy could be worth more than
$11 trillion by 2050. The firm also compared the opportunity for Green Hydrogen to pre-2007 smartphones and the Internet prior
to the dot-com boom.
Electrolyzer Technology
For
more than 200 years, scientists have known how to split water into hydrogen (H2) and oxygen (O2). By simply
placing two metal electrodes into a jar of salted water (electrolytic solution) and applying an electrical voltage between them,
H2 and O2 will bubble up at the separate electrodes. This process is called electrolysis and the
device is called an electrolyzer. If the source of electricity is renewable such as solar or wind, then the resulting hydrogen
is a zero-greenhouse gas renewable resource – Green Hydrogen.
There are two primary
types of commercial electrolyzers. The original alkaline electrolyzer and the modern proton exchange membrane (PEM) electrolyzer.
However, neither technology can currently produce Green Hydrogen at scale that is cost competitive with Grey or Brown Hydrogen
sourced from fossil fuels.
PEM electrolysis has
the advantage of higher efficiency and quickly reacting to fluctuating input energy, which is ideally matched to the fluctuating
nature of solar and wind energy. Its smaller footprint also makes it ideal for distributed systems, which is how most renewable
energy systems are implemented.
PEM electrolyzers are
expensive because they rely on rare earth materials such as platinum and iridium – literally stardust found only in asteroids
– as chemical catalysts for the water-splitting reactions. According to the National Renewable Energy Laboratory (NREL),
these materials account for nearly 50% of the capital cost of PEM electrolyzers. Additionally, the cost of electricity contributes
to over 50% of hydrogen production costs.
Our technology is aimed
at lowering the cost of catalysts and key components in PEM electrolyzers by:
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Replacing rare earth materials with inexpensive earth abundant materials,
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Significantly reducing the amount of rare earth materials used, and
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Reducing energy consumption
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Applications of Green Hydrogen
Unlike lithium-ion where
it is simply a battery technology, Green Hydrogen is an economy. There are many applications for Green Hydrogen, some with larger
markets than others. Here are just a few.
(Source: U.S. DOE)
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Green Electric Grid - The electric grid is finicky, sometimes it needs a lot of electricity sometimes it doesn’t. Unused electricity from solar and wind farms are wasted if it is not used immediately. The Sun doesn’t always shine, and the wind doesn’t always blow, and this makes solar and wind sourced electricity unreliable. One solution is to use an electrolyzer system to convert the excess solar/wind electricity into hydrogen and store it in inexpensive nearby underground caverns. When electricity demand spikes, the hydrogen can be converted back into electricity through a fuel cell. This is a very scalable solution as opposed to miles and miles of very expensive grid-scale battery systems. In fact, the Advanced Clean Energy Storage project in Utah aims to do just this by building the world’s largest storage facility for 1,000 megawatts of clean power, partly by putting hydrogen into underground salt caverns.
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Fuel Cell Electric Vehicles (FCEV) - Perhaps the most exciting application of hydrogen is the direct use in fuel cell electric vehicles. A hydrogen tank in a passenger car can be filled in under 5 minutes. The only tailpipe emission is water. Big name car manufacturers such as Toyota, Hyundai, BMW, Mercedes-Benz all have FCEVs in development. China is committing to putting 1,000,000 FCEVs on the road by 2030.
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Battery Electric Vehicles (BEV) - BEV and FCEV can coexist just like diesel and gasoline cars coexist today. Battery EVs running on electricity generated through the Green Electric Grid is a beneficiary and indirect user of hydrogen technology.
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Hydrogen Fueling Stations - Electrolyzers are well suited and scalable for distributed onsite Green Hydrogen generation in fueling station applications. With green electricity from a nearby solar array or renewable electric grid, Green Hydrogen can be produced anywhere and anytime. This distributed model of hydrogen production eliminates the need for expensive transportation from a centralized facility.
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Lower Carbon Gas Infrastructure - Green Hydrogen can serve as a steppingstone to a lower carbon footprint natural gas supply. Southern California Gas, and others, have demonstrated that the existing natural gas pipelines that supply gas to our cooking stoves and homes can safely contain 5-10% hydrogen without any modifications. This means that an electrolyzer system near a natural gas plant can inject Green Hydrogen directly into the existing gas infrastructure, lowering the carbon footprint of our meals and our warm homes.
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Air Taxis of the Future - Hydrogen has 200 times the theoretical energy of lithium-ion batteries per kilogram. In the emerging but potentially revolutionary air mobility market, small electric aircrafts, such as the Skai air tax drone, hydrogen is the obvious choice because weight matters. According to Skai, battery-powered air mobility vehicles are projected to have flight durations of less than half an hour before needing to recharge – Skai’s hydrogen fuel cells give them the ability to fly continuously for up to 4 hours or more with higher capacity auxiliary tanks.
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Research and Development
Our electrolyzer technology
research and development is conducted at the University of California at Los Angeles through a sponsored research agreement. The
current program is focused on replacing iridium with earth abundant materials that meet or exceed the performance characteristics
of iridium. We have also identified additional components and materials in electrolyzers where meaningful cost reductions can be
performed. While iridium is the oxygen catalyst, its counterpart on the hydrogen side is platinum, a material so rare that only
200 tons are mined every year. Another critical component is the porous transport layer (“PTL”), aka gas diffusion
layer, which facilitates the movement of water and gases to and from the catalyst surfaces. According to the National Renewable
Energy Laboratory, the catalysts, membrane and PTL assembly account for more than 50%-75% of the capital cost of the electrolyzer
stack.
In parallel to our Green
Hydrogen technology program described above, we are developing a new material processing technology to produce Silicon Oxide Composite
anode material. Silicon Oxide Composite anode has recently received significant interest because of its superior cycle and calendar
life performance. We anticipate that a new processing technology can be developed to produce a type of Silicon Oxide Composite
anode material that will significantly lower the cost of lithium-ion batteries for EVs.
Marketing Strategy
We will begin marketing
our electrolyzer catalyst technologies as soon as a tangible form of quantitative performance demonstration becomes available.
Our marketing plan includes engaging with manufacturers of existing electrolyzer component and delivery infrastructure, as well
as identifying and developing relationships with potential licensing partners with large scale hydrogen generation and supply logistics
all over the world.
We will begin marketing
our silicon oxide processing technology in partnership with our joint development partners to electric vehicle manufacturers and
suppliers of EV batteries when the demonstration of our scaled-up material processing technology becomes available. Potential licensing
partners exist in the following industries: electric vehicles, consumer electronics and power tools.
We are currently outsourcing
our promotion efforts to a public relations firm that is assisting us with comprehensive advertising and promotion of the Company.
Backlog of Orders
We do not have any backlog
of orders.
Government Contracts
We do not have any government contracts at
this time.
Compliance with Environmental Laws and Regulations
Our operations are subject
to local, state and federal laws and regulations governing environmental quality and pollution control. To date, our compliance
with these regulations has had no material effect on our operations, capital, earnings, or competitive position, and the cost of
such compliance has not been material. We are unable to assess or predict at this time what effect additional regulations or legislation
could have on our activities.
Manufacturing and Distribution
We currently do not
have any mechanism for the manufacture and distribution of our own technology products, nor do we have adequate financing to undertake
these efforts on our own. BioBacksheetR is currently available for licensing only.
Intellectual Property
On May 19, 2011, we
filed a U.S. patent to protect the intellectual property rights for “Photovoltaic Module Backsheet, Materials for Use in
Module Backsheet and Process for Making the Same,” application number 13/093,549. The inventor listed on the patent
application is Stanley Levy, our former Chief Technology Officer. The Company is listed as assignee. This patent was issued
on July 14, 2015.
On March 26, 2018, North
Carolina Agricultural and Technical State University filed a U.S. patent application U.S. Serial No. 62/473,772 titled “Prelithiated
Silicon Particles for Lithium_Ion Batteries”, and we signed an Exclusive License Agreement for the use of the technology
effective September 25, 2017. The patent was issued on December 29, 2020.
On May 19, 2020, we
filed a provisional U.S. patent application to protect the intellectual property rights for “Silicon Alloy Anode for High
Power Batteries,” application number 63027154. The inventor listed on the patent application is David Lee, our Chief Executive
Officer. The Company is listed as assignee.
We rely upon confidentiality agreements signed by our employees, consultants and third
parties to protect our intellectual property.
Competition
There are a number of
companies developing technologies for catalysts intended for hydrogen electrolyzers. We expect a high level of competition, but
the market opportunity is very large.
There are a number of
companies manufacturing lithium-ion batteries including, Panasonic, Samsung, LG Chem, and Tesla. We plan to seek licensing arrangements
for our lithium-ion battery technology with a select group of companies such as the ones listed above, and do not expect to be
their direct competition.
Technology Development Partners
The Company has entered
into a research agreement, effective August 17, 2016 (the “Agreement”), with North Carolina A&T State University,
a constituent member of the University of North Carolina system (the “University”), pursuant to which the Company sponsors
the University’s project which includes the research, testing and evaluation of a proposal. On September 11, 2017, the Company
and the University extended the initial term of the Agreement for another twelve months, through September 11, 2018. The agreement
ended on September 11, 2018.
On September 28, 2017,
the Company entered into an Exclusive License Agreement (the “License Agreement”) with North Carolina A&T State
University related to the use of the University’s intellectual property in the Company’s business of developing, producing
and marketing lithium-ion batteries. Within thirty (30) days after entering into the License Agreement, the Company paid to the
University a one-time, non-refundable license fee in the sum of $15,000. Pursuant to the terms of the License Agreement, the Company
is obligated to pay all costs of preparing, filing, prosecution, issuance and maintenance related to the patents underlying the
intellectual property licensed by the Company. In addition, the Company is obligated to make certain annual royalty payments and
sub-licensing fees. On September 28, 2020, the Company again paid to the University annual non-refundable licensee fee of $15,000.
On May 26, 2017, the
Company executed a joint development agreement with Top Battery Co., Ltd. (“Top Battery”), a leading manufacturer of
advanced lithium-ion battery solutions, based in the Republic of Korea, to assess, develop, manufacture, and/or market high power,
high energy lithium-ion batteries integrating BioSolar technology and Top Battery technology.
On June 14, 2018, the
Company executed a joint development agreement with Silicio Ferrosolar SLU, a subsidiary of Ferroglobe, PLC (NASDAQ:GSM), for collaborative
efforts to assess, develop, and/or market silicon anode materials for high power, high energy lithium-ion batteries by integrating
BioSolar technology and Ferroglobe silicon materials.
On March 6, 2020, the
Company executed a joint development agreement with Soelect, Inc, for collaborative efforts to assess, develop, and/or market a
processing technology to produce silicon oxide anode materials for electric vehicle lithium-ion batteries.
On December 14, 2020,
the Company executed a sponsored research agreement with the University of California, Los Angeles, for collaborative efforts to
discover and develop efficient and stable earth-abundant material-based catalysts for hydrogen production through water electrolysis.
To assist us in the
development of our technology, we intend to seek out and enter into technology development agreements with other entities with
battery testing and materials expertise.
Corporate Information and History
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 Development
On January 24, 2021 (the
“Signing Date”), the Company entered into a securities purchase agreement (the “Purchase Agreement”) with
a single institutional and accredited investor (the “Investor”) pursuant to which the Company will sell to the Investor
in a private placement an aggregate of (i) 52,000,000 shares of common stock (the “Shares”), (ii) pre-funded warrants
to purchase up to an aggregate of 31,333,334 shares of common stock (the “Pre-Funded Warrants”) and (iii) warrants
to purchase up to an aggregate of 83,333,334 shares of common stock for gross proceeds to the Company of approximately $5,000,000.
The combined purchase price for one share of common stock and a warrant to purchase one share of common stock is $0.06 and the
combined purchase price for one pre-funded warrant to purchase one share of common stock and a warrant to purchase one share of
common stock is 0.0599.
The Company intends to
use the net proceeds primarily to expand and accelerate the development of its electrolyzer technology, as well as for working
capital and general corporate purposes. The closing was on January 27, 2021.
The Pre-Funded warrants
have an exercise price of $0.0001 per share, subject to adjustment and no expiration date. The Pre-Funded Warrants will be
exercisable immediately and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.
The Warrant is exercisable
for a period of five and one-half years from the date of issuance and has an exercise price of $0.06 per share, subject to adjustment
as set forth in the Warrant for stock splits, stock dividends, recapitalizations and similar customary adjustments. The Investor
may exercise the Warrant on a cashless basis if the shares of common stock underlying the Warrant (the “Warrant Shares”)
are not then registered pursuant to an effective registration statement. The Investor has contractually agreed to restrict its
ability to exercise the Warrant such that the number of shares of the Company’s common stock held by the Investor and its
affiliates after such exercise does not exceed the Beneficial Ownership Limitation set forth in the Warrant which may not exceed
4.99% of the Company’s then issued and outstanding shares of common stock.
In connection with the
Purchase Agreement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”)
with the Investor. Pursuant to the Registration Rights Agreement, the Company will be required to file a resale registration statement
(the "Registration Statement") with the Securities and Exchange Commission (the “SEC”) to register for resale
of the Shares, the shares issuable upon exercise of the Pre-Funded Warrants and the Warrant Shares, within 15 days of the Signing
Date, and to have such Registration Statement declared effective within 60 days after the Signing Date, or 90 days of the Signing
Date in the event the Registration Statement is “fully” reviewed by the SEC. The Company will be obligated to pay certain
liquidated damages to the investor if the Company fails to file the resale registration statement when required, fails to cause
the Registration Statement to be declared effective by the SEC when required, of if the Company fails to maintain the effectiveness
of the Registration Statement.
The Company filed the
Registration Statement with the SEC on January 29, 2021 and it was declared effective by the SEC on February 5, 2021. The Registration
Statement registered the Shares, the Shares issuable upon exercise of the Pre-Funded Warrant, the Warrant shares and the shares
issuable upon exercise of the warrants issued to the placement agent (as noted in the paragraph below).
Pursuant to an engagement
letter (the “Engagement Letter”), dated as of January 22, 2021, by and between the Company and H.C. Wainwright &
Co., LLC (“Wainwright”), the Company engaged Wainwright to act as the Company’s exclusive placement agent in
connection with the offering. Pursuant to the engagement agreement, the Company agreed to pay Wainwright a cash fee of 7.5% of
the gross proceeds the Company receives under the Purchase Agreement. The Company also agreed to pay Wainwright (i) a management
fee equal to 1.0% of the gross proceeds raised in the offering; and (ii) $85,000 for non-accountable expenses. In addition, the
Company agreed to issue to Wainwright (or its designees) placement agent warrants (the “Placement Agent Warrants”)
to purchase a number of shares equal to 7.5% of the aggregate number of Shares sold under the Purchase Agreement., or warrants
to purchase up to an aggregate of 6,250,000 shares. The Placement Agent Warrants generally will have the same terms as the Warrants,
except they will have an exercise price of $0.075 per share.
EMPLOYEES
As of February 12, 2021,
we had two (2) full time employee. We have not experienced any work stoppages and we consider relations with our employees to be
good.
Risks Related to Our Business and
Our Industry
Our limited
operating history does not afford investors a sufficient history on which to base an investment decision.
We
were formed in April 2006 and are currently developing a new technology that has not yet gained market acceptance. There can be
no assurance that at this time we will operate profitably or that we will have adequate working capital to meet our obligations
as they become due.
Investors
must consider the risks and difficulties frequently encountered by early stage companies, particularly in rapidly evolving markets.
Such risks include the following:
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competition;
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need for acceptance of products;
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ability to continue to develop and extend brand identity;
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ability to anticipate and adapt to a competitive market;
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ability to effectively manage rapidly expanding operations;
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amount and timing of operating costs and capital expenditures relating to expansion of our business, operations, and infrastructure; and
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dependence upon key personnel.
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We
cannot be certain that our business strategy will be successful or that we will successfully address these risks. In the event
that we do not successfully address these risks, our business, prospects, financial condition, and results of operations could
be materially and adversely affected and we may have to curtail our business.
We have
a history of losses and have never realized revenues to date. We expect to continue to incur losses and no assurance can be given
that we will realize revenues. Accordingly, we may never achieve and sustain profitability.
As
of December 31, 2020, we have an accumulated deficit, of $151,914,888. For the year ended December 3,2020, we incurred a net loss
of 140,544,660. We expect to continue to incur net losses until we are able to realize revenues to fund our continuing operations.
We may fail to achieve any or significant revenues from sales or achieve or sustain profitability. Accordingly, there can be no
assurance of when, if ever, we will be profitable or be able to maintain profitability.
We
have historically raised funds through various capital raising transactions. We will require additional funds in the future to
fund our business plans, either through additional equity or debt financings or collaborative agreements or from other sources.
We have no commitments to obtain such additional financing, and we may not be able to obtain any such additional financing on terms
favorable to us, or at all. In the event we are unable to obtain additional financing, we may be unable to implement our business
plan. Even with such financing, we have a history of operating losses and there can be no assurance that we will ever become profitable.
We may be
unable to manage our growth or implement our expansion strategy.
We may not be able
to develop our product or implement the other features of our business strategy at the rate or to the extent presently planned.
Our projected growth will place a significant strain on our administrative, operational and financial resources. If we are unable
to successfully manage our future growth, establish and continue to upgrade our operating and financial control systems, recruit
and hire necessary personnel or effectively manage unexpected expansion difficulties, our financial condition and results of operations
could be materially and adversely affected.
Our revenues
will be dependent upon acceptance of our products by the market; the failure of which would cause us to curtail or cease operations.
We
believe that virtually all of our revenues will come from the sale or license of our products. As a result, we will continue to
incur substantial operating losses until such time as we are able to develop our product and generate revenues from the sale or
license of our products. There can be no assurance that businesses and customers will adopt our technology and products, or that
businesses and prospective customers will agree to pay for or license our products. Our technology and product, when fully developed,
may not gain market acceptance due to various factors such as not enough cost savings between our method of producing hydrogen
and other more conventional methods. In the event that we are not able to significantly increase the number of customers that purchase
or license our products, or if we are unable to charge the necessary prices or license fees, our financial condition and results
of operations will be materially and adversely affected.
We may not be able to successfully develop
and commercialize our technologies which would result in continued losses.
While we have made progress
in the development of our products, we have generated only minimal revenues and are unable to project when we will achieve profitability,
if at all. As is the case with any new technology, we are a development stage company and expect the development process to continue.
We may not be able to develop our product offering, develop a customer base and markets, or implement the other features of our
business strategy at the rate or to the extent presently planned. Growth beyond the product development stage will place a significant
strain on our administrative, operational and financial resources. In addition, our operations will not be able to move out
of the development stage without additional funding.
We face
intense competition, and many of our competitors have substantially greater resources than we do.
We
operate in a competitive environment that is characterized by price fluctuation and technological change. We will compete with
major international and domestic companies. Some of our current and future potential competitors may have greater market recognition
and customer bases, longer operating histories and substantially greater financial, technical, marketing, distribution, purchasing,
manufacturing, personnel and other resources than we do. In addition, competitors may be developing similar technologies with a
cost similar to, or lower than, our projected costs. As a result, they may be able to respond more quickly to changing customer
demands or to devote greater resources to the development, promotion and sales of solar and solar-related products than we can.
Our
business plan relies on sales of our products based on either a demand for truly renewable clean hydrogen or economically produced
clean hydrogen. If we fail to compete successfully, our business would suffer and we may lose or be unable to gain market share.
Neither the demand for our product nor our ability to manufacture have yet been proven.
We
believe that our ability to compete depends in part on a number of factors outside of our control, including:
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the ability of our competitors to hire, retain and motivate qualified personnel;
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the ownership by competitors of proprietary tools to customize systems to the needs of a particular customer;
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the price at which others offer comparable services and equipment;
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the extent of our competitors’ responsiveness to customer needs; and
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installation technology.
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There can be no assurance
that we will be able to compete successfully against current and future competitors. If we are unable to compete effectively, or
if competition results in a deterioration of market conditions, our business and results of operations would be adversely affected.
Our business
depends on proprietary technology that we may not be able to protect and may infringe on the intellectual property rights of others.
Our success will depend,
in part, on our technology’s commercial viability and on the strength of our intellectual property rights. We currently hold
a patent in the US, but still have a patent pending in the US. There is no guarantee the pending patent will be granted. In addition,
any agreements we enter into with our employees, consultants, advisors, customers and strategic partners will contain restrictions
on the disclosure and use of trade secrets, inventions and confidential information relating to our technology may not provide
meaningful protection in the event of unauthorized use or disclosure.
Third
parties may assert that our technology, or the products we, our customers or partners commercialize using our technology, infringes
upon their proprietary rights. We have yet to complete an infringement analysis and, even if such an analysis were available at
the current time, it is virtually impossible for us to be certain that no infringement exists, particularly in our case where our
products have not yet been fully developed.
We
may need to acquire licenses from third parties in order to avoid infringement. Any required license may not be available to us
on acceptable terms, or at all.
We
could incur substantial costs in defending ourselves in suits brought against us for alleged infringement of another party’s
intellectual property rights as well as in enforcing our rights against others, and if we are found to infringe, the manufacture,
sale and use of our or our customers’ or partners’ products could be enjoined. Any claims against us, with or without
merit, would likely be time-consuming, requiring our management team to dedicate substantial time to addressing the issues presented.
Furthermore, the parties bringing claims may have greater resources than we do.
We do not
maintain theft or casualty insurance and only maintain modest liability and property insurance coverage and therefore, we could
incur losses as a result of an uninsured loss.
We
do not maintain theft, casualty insurance, or property insurance coverage. We cannot assure that we will not incur uninsured liabilities
and losses as a result of the conduct of our business. Any such uninsured or insured loss or liability could have a material adverse
effect on our results of operations.
If we lose
key employees and consultants or are unable to attract or retain qualified personnel, our business could suffer.
Our success is highly
dependent on our ability to attract and retain qualified scientific, engineering and management personnel. We are highly dependent
on our CEO, David Lee. The loss of Mr. Lee’s service could have a material adverse effect on our operations. Mr. Lee
is employed on “at will” basis. Accordingly, there can be no assurance that he will remain associated with us. Our
management’s efforts will be critical to us as we continue to develop our technology and as we attempt to transition from
a development stage company to a company with commercialized products and services. If we were to lose Mr. Lee’s or the services
of the development team at UCLA, or the services of the consultants, we may experience difficulties in competing effectively, developing
our technology and implementing our business strategies.
The loss of strategic alliances used
in the development of our products and technology could impede our ability to complete our product and result in a material adverse
effect causing the business to suffer.
We
pursue strategic alliances with other companies in areas where collaboration can produce technological and industry advancement. We
have entered into the sponsored research agreement with The Regents of the University of California
on Behalf of its Los Angeles Campus which is set to terminate December 31, 2021. If we are unable to extend the terms of the agreements,
we could suffer delays in product development or other operational difficulties which could have a material adverse effect on our
results of operations.
There is
substantial doubt about our ability to continue as a going concern.
Our
independent public accounting firm in their report dated February 16, 2021 included an explanatory paragraph expressing
substantial doubt in our ability to continue as a going concern without additional capital becoming available. Going concern
contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable
length of time. Our ability to continue as a going concern ultimately is dependent on our ability to generate a profit which
is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and,
ultimately, to achieve profitable operations. As a result, our financial statements do not reflect any adjustment which would
result from our failure to continue to operate as a going concern. Any such adjustment, if necessary, would materially affect
the value of our assets.
The Covid-19 pandemic may negatively
affect our operations.
The COVID-19 pandemic
is having widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business
practices. The continuing impacts of COVID-19 are highly unpredictable and could be significant, and may have an adverse effect
on our business, operations and our future financial performance.
The impact of the pandemic
on our business, operations and future financial performance could include, but is not limited to, that:
|
●
|
We may experience delays in our product development;
|
|
●
|
The rapid and broad-based shift to a remote working environment creates inherent productivity, connectivity, and oversight challenges.
|
|
●
|
Volatility in the equity markets could affect the value of our equity to shareholders and have an impact on our ability to raise capital.
|
Risks Related to Our Common
Stock
There is
a limited trading market for our common stock.
Our common stock is
not listed on any national securities exchange. Accordingly, investors may find it more difficult to buy and sell our shares than
if our common stock was traded on an exchange. Although our common stock is quoted on the OTC Pink, it is an unorganized, inter-dealer,
over-the-counter market which provides significantly less liquidity than the Nasdaq Capital Market or other national securities
exchange. Further, there is limited trading in our common stock. These factors may have an adverse impact on the trading and price
of our common stock.
Our common
stock could be subject to extreme volatility.
The
trading price of our common stock may be affected by a number of factors, including events described in the risk factors set forth
in this prospectus, as well as our operating results, financial condition and other events or factors. In addition to the uncertainties
relating to future operating performance and the profitability of operations, factors such as variations in interim financial results
or various, as yet unpredictable, factors, many of which are beyond our control, may have a negative effect on the market price
of our common stock. In recent years, broad stock market indices, in general, and smaller capitalization companies, in particular,
have experienced substantial price fluctuations. In a volatile market, we may experience wide fluctuations in the market price
of our common stock and wide bid-ask spreads. These fluctuations may have a negative effect on the market price of our common stock.
In addition, the securities market has, from time to time, experienced significant price and volume fluctuations that are not related to
the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market
price of our common stock.
There is a large number of authorized
but unissued shares of capital stock available for issuance, which may result in substantial dilution to existing shareholders.
Our
articles of Incorporation authorized the issuance of up to 3,000,000,000 shares of common stock, and 10,000,000 shares of preferred
stock, par value $0.0001, of which 474,286,424 shares of common stock and 1,000 shares of Series B Preferred Stock are stock are
outstanding as of January 22, 2021 (excluding shares issuable upon conversion or exercise of outstanding convertible notes, options
and warrants). Subject to our total authorized shares, our Board of Directors has the ability to authorize the issuance of additional
shares of common stock and preferred stock without shareholder approval. Such issuances will result in substantial dilution to
existing shareholders. In addition, the availability of such a large number of capital stock could be utilized, under certain circumstances,
as a method of discouraging, delaying or preventing a change in control of the Company. Further, our issuance of common stock upon
conversion or exercise of outstanding convertible notes, warrants, and options may result in substantial dilution to our stockholders,
which may have a negative effect on the price of our common stock.
We have
never paid common stock dividends and have no plans to pay dividends in the future, as a result our common stock may be less valuable
because a return on an investor’s investment will only occur if our stock price appreciates.
Holders
of shares of our common stock are entitled to receive such dividends as may be declared by our Board of Directors. To date, we
have paid no cash dividends on our shares of common stock and we do not expect to pay cash dividends on our common stock in the
foreseeable future. We intend to retain future earnings, if any, to provide funds for operations of our business. Therefore, any
return investors in our common stock will be in the form of appreciation, if any, in the market value of our shares of common stock.
There can be no assurance that shares of our common stock will appreciate in value or even maintain the price at which our stockholders
have purchased their shares.
Our common stock is subject to the SEC’s penny stock rules.
Unless
our common stock is listed on a national securities exchange, including the Nasdaq Capital Market, or we have stockholders’
equity of $5,000,000 or less and our common stock has a market price per share of less than $5.00, transactions in our common stock
will be subject to the SEC’s “penny stock” rules. If our common stock remains subject to the “penny stock”
rules promulgated under the Securities Exchange Act of 1934, broker-dealers may find it difficult to effectuate customer transactions
and trading activity in our securities may be adversely affected.
In
accordance with these rules, broker-dealers participating in transactions in low-priced securities must first deliver a risk disclosure
document that describes the risks associated with such stocks, the broker-dealer’s duties in selling the stock, the customer’s
rights and remedies and certain market and other information. Furthermore, the broker-dealer must make a suitability determination
approving the customer for low-priced stock transactions based on the customer’s financial situation, investment experience
and objectives. Broker-dealers must also disclose these restrictions in writing to the customer, obtain specific written consent
from the customer, and provide monthly account statements to the customer. The effect of these restrictions will probably decrease
the willingness of broker-dealers to make a market in our common stock, decrease liquidity of our common stock and increase transaction
costs for sales and purchases of our common stock as compared to other securities. Our management is aware of the abuses that have
occurred historically in the penny stock market.
This
may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
Our articles of incorporation allow
for our board to create new series of preferred stock without further approval by our stockholders, which could adversely affect
the rights of the holders of our common stock.
Our board of directors
has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors has the authority
to issue up to 10,000,000 shares of our preferred stock without further stockholder approval. As a result, our board of directors
could authorize the issuance of a series of preferred stock that would grant to holders of preferred stock the right to our assets
upon liquidation, or the right to receive dividend payments before dividends are distributed to the holders of common stock. In
addition, our board of directors could authorize the issuance of a series of preferred stock that has greater voting power than
our common stock or that is convertible into our common stock, which could decrease the relative voting power of our common stock
or result in dilution to our existing stockholders.
On January 15, 2021,
as approved by the Board, the Company filed the Certificate of Designation (the “Certificate of Designation”) for its
newly-created Series B Preferred Stock with the Secretary of State of Nevada designating 1,000 shares of its authorized preferred
stock as Series B Preferred Stock. The shares of Series B Preferred Stock have a par value of $0.0001 per share. The Series B Preferred
Stock does not have a dividend rate or liquidation preference and are not convertible into shares of our common stock. The 1,000
shares of Series Be Preferred have been issued to David Lee, our Chief Executive Officer.
For so long as any shares
of the Series B Preferred Stock remain issued and outstanding, the holders thereof, voting separately as a class, shall have voting
power equal to 51% of the total vote (representing a super majority voting power) on all shareholder matters of the Company. Such
vote shall be determined by the holder(s) of a majority of the then issued and outstanding shares of Series B Preferred Stock.
The shares of the Series
B Preferred Stock shall be automatically redeemed by us at their par value on the first to occur of the following triggering
events: (i) a date forty five (45) days after the effective date of the Certificate of Designation, (ii) on the date that Mr. Lee
ceases, for any reason, to serve as officer, director or consultant of the Company, or (ii) on the date that the Company’s
shares of common stock first trade on any national securities exchange and such listing is conditioned upon the elimination of
the preferential voting rights of the Series B Preferred Stock set forth in the Certificate of Designation.
Additionally, we are
prohibited from adopting any amendments to our Bylaws, Articles of Incorporation, as amended, as set forth in the Certificate of
Designation, without the affirmative vote of at least 66-2/3% of the outstanding shares of Series B Preferred Stock. However, we
may, by any means authorized by law and without any vote of the holders of shares of Series B Preferred Stock, make technical,
corrective, administrative or similar changes to such Certificate of Designation that do not, individually or in the aggregate,
adversely affect the rights or preferences of the holders of shares of Series B Preferred Stock
The issuance of the
Series B Preferred Stock may prevent or frustrate attempts by stockholders to change the board of directors or current management
and could make a third-party acquisition of the Company difficult which could limit the price that investors might be willing to
pay in the future for shares of the Company’s common stock.
Additional stock offerings in the
future may dilute then-existing shareholders’ percentage ownership of the Company.
Given our plans and
expectations that we will need additional capital and personnel, we anticipate that we will need to issue additional shares of
common stock or securities convertible or exercisable for shares of common stock, including convertible preferred stock, convertible
notes, stock options or warrants. The issuance of additional securities in the future will dilute the percentage ownership of then
current stockholders.
Our headquarters are
located at 27936 Lost Canyon Road, Suite 202, Santa Clarita, California 91387. We lease our facility under a month-to-month lease
without an expiration date. Our monthly lease payment is $550. The size of our office is 144 square feet.
ITEM 3.
|
LEGAL PROCEEDINGS.
|
We are not currently
a party to, nor are any of our property currently the subject of, any pending legal proceeding that will have a material adverse
effect on our business.
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
N/A
The accompanying notes are an integral part
of these audited financial statements
The accompanying notes are an integral part
of these audited financial statements
The accompanying notes are an integral
part of these audited financial statements
The accompanying notes are an integral part
of these audited financial statements
NOTES TO FINANCIAL STATEMENTS – AUDITED
FOR THE YEARS ENDED DECEMBER 31, 2020 AND
2019
1.
|
ORGANIZATION AND LINE OF BUSINESS
|
Organization
BioSolar, Inc. (the “Company”)
was incorporated in the state of Nevada on April 24, 2006. The Company, based in Santa Clarita, California, began operations
on April 25, 2006 to develop and market Photovoltaic solar technology products.
Line of Business
We are a developer of clean energy
technologies. Our current focus is on developing an electrolyzer technology to lower the cost of Green Hydrogen production. We
are developing technologies to significantly reduce or replace rare earth materials with inexpensive earth abundant materials in
electrolyzers to help usher in a Green Hydrogen economy. We are also developing innovative technologies to increase the storage
capacity, lower the cost and extend the life of lithium-ion batteries for electric vehicles or EV. We previously developed BioBacksheetR,
a high performance green back sheet for Photovoltaic solar modules.,
Going Concern
The accompanying financial statements
have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and
liabilities and commitments in the normal course of business. The accompanying financial statements do not reflect any
adjustments that might result if the Company is unable to continue as a going concern. During the year ended December 31,
2020, the Company did not generate any revenue, incurred net loss of $140,544,660, which includes a non-cash net gain in change
in derivative of $139,038,754 and used cash in operations of $647,298. As of December 31, 2020, the Company had a working
capital deficiency of $150,532,859 and a shareholders’ deficit of $151,914,888. These factors, among others raise
substantial doubt about the Company’s ability to continue as a going concern. Our independent auditors, in their
report on our audited financial statements for the year ended December 31, 2020 expressed substantial doubt about our ability to
continue as a going concern.
The accompanying financial statements
have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization
of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented
in the financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do
not include any adjustment that might result from the outcome of this uncertainty.
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, achieving
a level of profitable operations and receiving additional cash infusions. During the year ended December 31, 2020, the Company
obtained funds from the issuance of convertible note agreements. Management believes this funding will continue from its’
current investors and from new investors. Management believes the existing shareholders, and the prospective new investors will
provide the additional cash needed to meet the Company’s obligations as they become due and will allow the development of
its core business operations. 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 stockholders, 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. The Company adopted Accounting Standards Codification (“ASC”) 606, whereby revenue will be recognized as performance
obligations are satisfied and customers obtain control of goods or services. However, in the event of a loss on a sale is foreseen,
the Company will recognize the loss as it is determined. 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.
BIOSOLAR, INC.
NOTES TO FINANCIAL STATEMENTS – AUDITED
FOR THE YEARS ENDED DECEMBER 31, 2020 AND
2019
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
Property and Equipment
Property and equipment are stated at cost, and are
depreciated using straight line over its estimated useful lives:
Computer equipment
|
|
|
5 Years
|
|
Machinery and equipment
|
|
|
10 Years
|
|
Depreciation expense for the years ended December 31,
2020 and 2019 was $2,854 and $4,623, respectively.
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
|
|
2020
|
|
|
2019
|
|
Patents
|
|
|
|
$
|
45,336
|
|
|
$
|
45,336
|
|
Less accumulated amortization
|
|
15 years
|
|
|
(15,112
|
)
|
|
|
(12,090
|
)
|
|
|
|
|
$
|
30,224
|
|
|
$
|
33,246
|
|
Amortization expense for the years ended
December 31, 2020 and 2019 was $1,511 and $2,267, respectively.
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.
The Company granted 12,000,000
stock options to its’ employee and 3,950,000 stock options to and board of directors for services. As of December 31, 2020,
there were 15,950,000 stock options outstanding.
As of December 31, 2020, the Company
did not issue any warrants and had no warrants outstanding.
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 December 31, 2020, 15,950,000 stock options are outstanding.
Income Taxes
Deferred income taxes are provided
using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and
tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax
assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws
and rates of the date of enactment.
When tax returns are filed, it
is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject
to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The
benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence,
management believes it is more likely than not that the position will be sustained upon examination, including the resolution of
appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax
positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more
than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits
associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized
tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing
authorities upon examination.
On December 22, 2017, the Tax
Cut and Jobs Act (the “Tax Act”) was signed into law by the President of the United States. The TCJA is a
tax reform act that among other things, reduced corporate income tax rate to 21%, effective January 1, 2018. Accordingly,
the Company adjusted its deferred tax assets and liabilities on January 1, 2018, using the new corporate rate of 21%. See
Note 7.
Research and Development
Research and development costs
are expensed as incurred. Total research and development costs were $177,722 and $264,687 for the years ended December 31,
2020 and 2019, respectively.
BIOSOLAR, INC.
NOTES TO FINANCIAL STATEMENTS – AUDITED
FOR THE YEARS ENDED DECEMBER 31, 2020 AND
2019
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
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).
The Company has excluded shares
issuable from convertible debt of $2,764,184 and 15,950,000 stock options for the year ended December 31, 2020, because their impact
on the income per share is antidilutive.
The Company has included shares
issuable from convertible debt of $2,854,033 and 15,950,000 stock options for the year ended December 31, 2019, because their impact
on the income per share is dilutive.
|
|
For the Years Ended
|
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Income (Loss) to common shareholders (Numerator)
|
|
$
|
(140,544,660
|
)
|
|
$
|
(4,122,365
|
)
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of common shares outstanding (Denominator)
|
|
|
280,952,034
|
|
|
|
92,022,751
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of common shares outstanding (Denominator)
|
|
|
280,952,034
|
|
|
|
679,815,020
|
|
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 December 31, 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.
|
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 on December
31, 2020 and 2019:
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liability at fair value as of December 31, 2020
|
|
$
|
148,590,100
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
148,590,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liability at fair value as of December 31, 2019
|
|
$
|
8,919,202
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8,919,202
|
|
Fair Value of Financial Instruments
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, 2018
|
|
$
|
14,032,942
|
|
Fair value of derivative liabilities issued
|
|
|
663,608
|
|
Loss on change in derivative liability
|
|
|
(5.777.348
|
)
|
Balance as of December 31, 2019
|
|
$
|
8,919,202
|
|
Fair value of derivative liabilities issued
|
|
|
632,144
|
|
Loss on change in derivative liability
|
|
|
139,038,754
|
|
Balance as of December 31, 2020
|
|
$
|
148,590,100
|
|
BIOSOLAR, INC.
NOTES TO FINANCIAL STATEMENTS – AUDITED
FOR THE YEARS ENDED DECEMBER 31, 2020 AND
2019
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
Accounting for Derivatives
The Company evaluates all of its
financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.
For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at
its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations.
For stock-based derivative financial instruments, the Company uses a probability weighted average series Binomial lattice formula
pricing models to value the derivative instruments at inception and on subsequent valuation dates.
The classification of derivative
instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each
reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether
or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
Recently Issued Accounting Pronouncements
In
February 2016, the FASB issued ASU No. 2016-2, which creates ASC Topic 842, “Leases.” This update increases transparency
and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key
information about leasing arrangements. This guidance is effective for interim and annual reporting periods beginning after December
15, 2018. The Company has evaluated the impact of the adoption of ASC 2016-2, which had no effect 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 has
evaluated the impact of the adoption of ASU 2018-07, which has no effect 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 has evaluated the impact
of the adoption of ASU 2018-13, which has no effect 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.
Preferred Stock
On October 28, 2019, the Board
of Directors granted 10,000,000 shares of preferred stock, par value $0.0001 per share, and authorized Series A Preferred stock
consisting of one thousand (1,000) shares, which shall not be entitled to receive dividends paid on common stock, no liquidation
preference, and no conversion rights. The Series A Preferred Stock will have voting rights for as long as the Series A Preferred
Stock remains issued and outstanding, shall have the fifty-one percent (51%) majority voting power of the Company’s shareholders.
The Series A Preferred Stock shall
be automatically redeemed at par value without any required action by the Company or the holder, and shall be triggered by the
following events:
|
(i)
|
A date forty-five (45) days after the effective date of the certificate of designation.
|
|
(ii)
|
On the date that Mr. Lee ceases for any reason, to serve as officer, director or consultant of the Company.
|
|
(iii)
|
On the date that the Company’s shares of common stock first trade on any national securities exchange.
|
The Series A Preferred Stock automatically
reverted back to the Company at par value on December 12, 2019. As of December 31, 2019, there were no Series A Preferred Stock
outstanding.
Common Stock
On October 28, 2019, the Board
of Directors deem it advisable and in the best interest of the Corporation to increase the authorized number of shares of common
stock of the Corporation from 500,000,000 shares of common stock, par value $0.0001 per share to 3,000,000,000 shares of common
stock, par value $0.0001 per share.
During the year ended December
31, 2020, the Company issued 322,286,009 shares of common stock upon conversion of convertible promissory notes in the amount of
$738,850, plus accrued interest of $101,884, and other fees of $4,750 at prices ranging from $0.0014 - $0.0074.
During the year ended December
31, 2019, the Company issued 73,273,212 shares of common stock upon conversion of convertible promissory notes in the amount of
$587,628, plus accrued interest of $74,006, and other fees of $500 at prices ranging from $0.00495 - $0.0172.
BIOSOLAR, INC.
NOTES TO FINANCIAL STATEMENTS – AUDITED
FOR THE YEARS ENDED DECEMBER 31, 2020 AND
2019
Stock Options
The Company did not grant any
stock options during the years ended December 31, 2020 and 2019, respectively.
|
|
12/31/2020
|
|
|
12/31/2019
|
|
|
|
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
|
|
The weighted average remaining
contractual life of options outstanding as of December 31, 2020 and 2019 was as follows:
12/31/2020
|
|
|
12/31/2019
|
|
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
|
|
|
|
1.23
|
|
|
$
|
0.09
|
|
|
|
2,450,000
|
|
|
|
2,450,000
|
|
|
|
2.23
|
|
$
|
0.26
|
|
|
|
13,500,000
|
|
|
|
13,500,000
|
|
|
|
1.37
|
|
|
$
|
0.26
|
|
|
|
13,500,000
|
|
|
|
13,500,000
|
|
|
|
2.37
|
|
|
|
|
|
|
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 years ended December 31, 2020 and 2019, related to the granting of these options
was $0 and $0, respectively.
As of December 31, 2020 and 2019,
respectively, there was no intrinsic value with regards to the outstanding options.
5.
|
CONVERTIBLE PROMISSORY NOTES
|
As of December 31, 2020 and 2019,
the outstanding convertible promissory notes net of debt discount are summarized as follows:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Convertible Promissory Notes, net of debt discount
|
|
$
|
2,764,184
|
|
|
$
|
2,598,336
|
|
Less current portion
|
|
|
275,985
|
|
|
|
390,987
|
|
Total long-term liabilities
|
|
$
|
2,488,199
|
|
|
$
|
2,207,349
|
|
Maturities of long-term debt,
net of debt discount for the next five years are as follows:
December 31,
|
|
Amount
|
|
2021
|
|
$
|
1,289,824
|
|
2022
|
|
|
473,560
|
|
2023
|
|
|
900,800
|
|
2024
|
|
|
25,000
|
|
2025
|
|
|
75,000
|
|
|
|
$
|
2,764,184
|
|
On December 31, 2020, the Company
had $2,764,184 in convertible promissory notes had a remaining debt discount of $275,985, leaving a net balance of $2,488,199.
BIOSOLAR, INC.
NOTES TO FINANCIAL STATEMENTS – AUDITED
FOR THE YEARS ENDED DECEMBER 31, 2020 AND
2019
5.
|
CONVERTIBLE PROMISSORY NOTES (Continued)
|
The Company issued an unsecured
convertible promissory note (the May 2014 Note”), in the amount of $500,000 on May 2, 2014. The May Note matured on September
18, 2019 and was extended to May 2, 2022 on December 26, 2019. 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 a) the lesser of $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 year ended December 31, 2020, the Company issued 100,105,926 shares of common stock
upon conversion of principal in the amount of $96,590, plus accrued interest of $54,460. As of December 31, 2020, the remaining
balance of the May 2014 Note was $1,560.
The Company issued various unsecured
convertible promissory notes (the 2015-2018 Notes”) in the aggregate amount of $2,145,000 on various dates of January 30,
2015 through February 9, 2018. The 2015-2018 Notes mature on January 30, 2023. The 2015-2018 Notes bears interest at 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 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 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 year ended December 31, 2020. During the year ended December 31, 2020, the Company issued 30,836,986
shares of common stock upon conversion of $27,200, plus accrued interest of $15,972. As of December 31, 2020, the aggregate balances
of the 2015-2018 Notes were $1,957,800.
The Company issued various unsecured
convertible promissory notes (the Feb 18 Note”) in the aggregate amount of $355,000 on various dates from February 26, 2018
through January 17, 2019. On October 12, 2020 and December 22, 2020, the Company received additional tranches in the amount of
$75,000, associated with the Feb 2018 Note for a total aggregate of $430,000. The maturity date of the Feb 18 Note was extended,
and as a result matures on dates from February 18, 2018 through December 22, 2025. The Feb 18 Note bears interest at 10% per annum.
The Feb 18 Note is convertible into shares of the Company’s common stock at conversion prices ranging from the a) the lesser
of $0.03 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 with-in 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 Feb 18 Note was 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 $2,810 during the year ended December 31, 2020. As of December 31, 2020, the balance of the Feb 18 Note was $430,000.
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-Apr 2019 Notes matures on dates
from February 25, 2020 and April 5, 2020. The Feb-Apr 2019 Notes bears 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 or lowest bid price 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 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. The Company issued 34,267,881 upon conversion of principal of
$72,384, plus accrued interest of $6,351 and other fees of $1,750. The Feb-Apr 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 $21,801 during
the year ended December 31, 2020. As of December 31, 2020, the note was fully converted.
BIOSOLAR, INC.
NOTES TO FINANCIAL STATEMENTS – AUDITED
FOR THE YEARS ENDED DECEMBER 31, 2020 AND
2019
5.
|
CONVERTIBLE PROMISSORY NOTES (Continued)
|
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 year ended December 31, 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 year ended December 31, 2020. The
July 2019 Note was fully converted as of December 31, 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 year ended December 31, 2020. The August 2019 Note as of December
31, 2020 had a remaining balance of $12,824.
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 year ended December 31, 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 year ended December 31, 2020. The
August 2019 Note was fully converted as of December 31, 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 year ended December 31, 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 year ended December 31, 2020. The Oct 2019 Note was fully converted as of December
31, 2020.
BIOSOLAR, INC.
NOTES TO FINANCIAL STATEMENTS – AUDITED
FOR THE YEARS ENDED DECEMBER 31, 2019 AND
2018
5.
|
CONVERTIBLE PROMISSORY NOTES (Continued)
|
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 year ended December 31, 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 year ended December 31, 2020. The Nov 2019 Note was fully converted as of December
31, 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 year ended December 31, 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 year
ended December 31, 2020. The Dec 2019 Note was fully converted as of December 31, 2020.
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 year ended December 31, 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 year ended December 31, 2020. The
Jan 2020 Note was fully converted as of December 31, 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
August 14, 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
year ended December 31, 2020. The Feb 2020 Note as of December 31, 2020 had a remaining balance of $53,500.
BIOSOLAR, INC.
NOTES TO FINANCIAL STATEMENTS – AUDITED
FOR THE YEARS ENDED DECEMBER 31, 2019 AND
2018
5.
|
CONVERTIBLE PROMISSORY NOTES (Continued)
|
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 year ended December 31, 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 year ended December 31, 2020. The
Mar 2020 Note was fully converted as of December 31, 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.
During the year ended December 31, 2020, the Company issued 12,616,691 shares of common stock upon conversion in principal of $53,000,
plus accrued interest of $2,650. The Apr 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 year ended December 31, 2020. The
Apr 2020 Note was fully converted as of December 31, 2020.
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.
During the year ended December 31, 2020, the Company issued 7,623,288 shares of common stock upon conversion in principal of $53,000,
plus accrued interest of $2,650. The Jun 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 year ended December 31, 2020. The
Jun 2020 Note was fully converted as of December 31, 2020.
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 $25,847 during the year ended December
31, 2020. The Jul 2020 Note as of December 31, 2020 had a remaining balance of $53,000.
BIOSOLAR, INC.
NOTES TO FINANCIAL STATEMENTS – AUDITED
FOR THE YEARS ENDED DECEMBER 31, 2019 AND
2018
5.
|
CONVERTIBLE PROMISSORY NOTES (Continued)
|
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 $21,781 during the
year ended December 31, 2020. The Aug 2020 Note as of December 31, 2020 had a remaining balance of $53,000.
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 $15,682 during the
year ended December 31, 2020. The Sep 2020 Note as of December 31, 2020 had a remaining balance of $53,000.
The Company issued an unsecured
convertible promissory note on November 2, 2020 (the Nov 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 November 2, 2020 Note matures on November
2, 2021. The Nov 2020 Note bears interest at 10% per annum. The Nov 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 Nov 2020 Note was considered a
derivative in accordance with current accounting guidelines because of the reset conversion features of the Nov 2020 Note. The
fair value of the Nov 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 $8,567 during the
year ended December 31, 2020. The Nov 2020 Note as of December 31, 2020 had a remaining balance of $53,000.
The Company issued an unsecured
convertible promissory note on December 2, 2020 (the Dec 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 December 2, 2020 Note matures on December
2, 2021. The Dec 2020 Note bears interest at 10% per annum. The Dec 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 Dec 2020 Note was considered a
derivative in accordance with current accounting guidelines because of the reset conversion features of the Nov 2020 Note. The
fair value of the Dec 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 $3,416 during the
year ended December 31, 2020. The Dec 2020 Note as of December 31, 2020 had a remaining balance of $43,000.
BIOSOLAR, INC.
NOTES TO FINANCIAL STATEMENTS – AUDITED
FOR THE YEARS ENDED DECEMBER 31, 2019 AND
2018
5.
|
CONVERTIBLE PROMISSORY NOTES (Continued)
|
We evaluated the financing transactions
in accordance with ASC Topic 815, Derivatives and Hedging, and determined that the conversion feature of the convertible promissory
note was not afforded the exemption for conventional convertible instruments due to its variable conversion rate. The note has
no explicit limit on the number of shares issuable, so they did not meet the conditions set forth in current accounting standards
for equity classification. The Company elected to recognize the note under paragraph 815-15-25-4, whereby, there would be a separation
into a host contract and derivative instrument. The Company elected to initially and subsequently measure the note in its entirety
at fair value, with changes in fair value recognized in earnings. The Company recorded a derivative liability representing the
imputed interest associated with the embedded derivative. The derivative liability is adjusted periodically per the stock price
fluctuations.
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 year ended December
31, 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 $632,143, 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 year ended December
31, 2020, the Company converted $738,850 in principal of convertible notes, plus accrued interest of $101,884, and other fees of
$4,750. The convertible notes were valued using the binomial lattice valuation model showing an increase in fair value of the derivatives
issued by $632,144 and the loss on the change in derivative by $139,038,754. As of December 31, 2020, the fair value of the derivative
liability was $148,590,100.
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:
|
|
12/31/2020
|
Risk free interest rate
|
|
0.08% - 0.17%
|
Stock volatility factor
|
|
164.0% -247.0%
|
Weighted average expected option life
|
|
6 months - 5 years
|
Expected dividend yield
|
|
None
|
On December 22, 2017, the U.S.
enacted the Tax Cuts and Jobs Act (the “Act”), which significantly changed U.S. tax law. The Act lowered the Company’s
U.S. statutory federal income tax rate from 35% to 21% effective January 1, 2018.
The Company files income tax returns
in the U.S. Federal jurisdiction, and the state of California. With few exceptions, the Company is no longer subject to U.S. federal,
state and local, or non-U.S. income tax examinations by tax authorities for years before 2017.
Included in the balance on December
31, 2020, are no tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about
the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the
disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment
of cash to the taxing authority to an earlier period.
BIOSOLAR, INC.
NOTES TO FINANCIAL STATEMENTS – AUDITED
FOR THE YEARS ENDED DECEMBER 31, 2020 AND
2019
7.
|
INCOME TAXES (Continued)
|
The Company’s policy is
to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During
the year ended December 31, 2020, the Company did not recognize interest and penalties.
As of December 31, 2020, the Company
had net operating loss carry-forwards of approximately $9,890,000 that may be offset against future taxable income. No tax benefit
has been reported in the December 31, 2020 financial statements since the potential tax benefit is offset by a valuation allowance
of the same amount.
The income tax provision differs
from the amount of income tax determined by applying the U.S. federal and state income tax rate of 30% to pretax income from continuing
operations for the years ended December 31, 2020 and 2019 due to the following:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Book Income (Loss)
|
|
|
(29,514,380
|
)
|
|
|
1,236,710
|
|
|
|
|
|
|
|
|
|
|
Non-deductible expenses
|
|
|
29,381,500
|
|
|
|
(1,013,080
|
)
|
|
|
|
|
|
|
|
|
|
Valuation Allowance
|
|
|
132,880
|
|
|
|
(223,630
|
)
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred taxes are provided on
a liability method whereby deferred tax assets are recognized for deductible differences and operating loss and tax credit carry-forwards
and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the difference between
the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net deferred tax assets consist
of the following components as of December 31, 2020 and 2019:
|
|
2020
|
|
|
2019
|
|
Deferred tax assets:
|
|
|
|
|
|
|
NOL carryover
|
|
|
(2,076,950
|
)
|
|
|
(1,947,750
|
)
|
R & D credit
|
|
|
166,875
|
|
|
|
142,385
|
|
Depreciation
|
|
|
10,735
|
|
|
|
10,735
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Less Valuation Allowance
|
|
|
1,899,340
|
|
|
|
1794,630
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
Due to the change in ownership
provisions of the Tax Reform Act of 1986, net operating loss carry-forwards for Federal income tax reporting purposes are subject
to annual limitations. Should a change in ownership occur, net operating loss carry-forwards may be limited as to use in future
years.
BIOSOLAR, INC.
NOTES TO FINANCIAL STATEMENTS – AUDITED
FOR THE YEARS ENDED DECEMBER 31, 2020 AND
2019
8.
|
RELATED PARTY TRANSACTION
|
On October 28, 2019, the Company
issued 1,000 shares of Series A Preferred Stock at $20 par value to Mr. David Lee as a bonus for services. The Series A Preferred
Stock had a fifty-one (51%) voting right only and was redeemed at par value on December 12, 2019. As of December 31, 2019, there
were no Series A Preferred Stock outstanding.
9.
|
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.
As of December 31, 2020, there
were no legal proceedings against the Company.
Management has evaluated subsequent
events according to the requirements of ASC TOPIC 855 and has determined that there are the following subsequent events:
On January 4, 2021, 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 “Jan 2021 Note”) in the principal amount of $53,500. The Jan 2021 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 of the two lowest (2) day trading prices
for common stock during the fifteen (15) trading day period prior to the conversion date.
On January 7, 2021, the Company
issued 4,062,044 shares of common stock upon conversion of principal in the amount of $53,000, plus accrued interest of $2,650.
On January 15, 2021, the Company
issued 14,025,851 shares of common stock upon conversion of principal in the amount of $12,300, plus accrued interest of $7,336.
On January 13, 2021, the Company
received additional consideration on the convertible note dated February 26, 2018 in the amount of $50,000.
On January 14, 2021, 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 “Feb 2021 Note”) in the principal amount of $53,500. The Feb 2021 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 of the two lowest (2) day trading prices
for common stock during the fifteen (15) trading day period prior to the conversion date.
On January 27, 2021, the Company
entered into a securities purchase agreement with an investor to sell through a private placement an aggregate of 52,000,000 shares
of common stock and two separate pre-funded warrants to purchase up to an aggregate of 31,333,334 shares of common stock, and an
aggregate of 83,333,334 shares of common stock for gross proceeds to the Company of approximately $5,000,000. The combined purchase
price for on share of common stock and a warrant to purchase one share of common stock is $0.06 and the combined purchase price
for one pre-funded warrant to purchase one share of common stock and a warrant to purchase one share of common stock is $0.0599.
On February 4, 2021, the Company
issued 868,175 shares of common stock upon conversion of principal in the amount of $53,000, plus accrued interest of $2,650.
On
February 5, 2021, the Company issued 908,118 shares of common stock upon conversion of principal in the amount of $12,824, plus
accrued interest of $5,564 and other fees of $1,000.
On February 5, 2021, the Company
issued 1,000,000 shares of common stock for services.