Attached files
| file | filename |
|---|---|
| EX-32.1 - CERTIFICATION - NewHydrogen, Inc. | f10k2017a1ex32-1_biosolarinc.htm |
| EX-31.1 - CERTIFICATION - NewHydrogen, Inc. | f10k2017a1ex31-1_biosolarinc.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER: 000-54819
BIOSOLAR, INC.
(Name of registrant in its charter)
| NEVADA | 20-4754291 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
27936 Lost Canyon Road, Suite 202, Santa Clarita, California 91387
(Address of principal executive offices) (Zip Code)
Issuer’s telephone Number: (661) 251-0001
Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act: common stock, par value $0.0001 per share
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☒ |
| Emerging growth company | ☐ | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided 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, 2017, was approximately $1,519,382.
The number of shares of registrant’s common stock outstanding, as of March 12, 2018 was 46,508,334.
DOCUMENTS INCORPORATED BY REFERENCE
None.
EXPLANATORY NOTE
BioSolar, Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-K/A (the “Form 10-K/A”) to its Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission on March 19, 2018 (the “Form 10-K”), solely to replace the Report of Independent Registered Public Accounting Firm (the “Report”), filed with the financial statements to the Form 10-K. An incorrect version of the Report was inadvertently included in the Form 10-K due to administrative error. In connection with the filing of this Form 10-K/A and pursuant to the rules of the SEC, we are including with this Form 10-K/A certain new certifications by our principal executive officer and acting principal financial officer. Accordingly, Part II, Item 8 of the Form 10-K is being amended to include the updated Report and Part IV, Item 15 of the Form 10-K is being amended to reflect the filing of the new certifications.
Other than with respect to the foregoing, this Form 10-K/A does not modify or update in any way the disclosures made in the Form 10-K, including the disclosures contained in Part I, Part II (Items 5 through 7 and Items 9 through 9B) and Part III of the Form 10-K. This Form 10-K/A speaks as of the original filing date of the Form 10-K and does not reflect events that may have occurred subsequent to such original filing date.
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
All financial information required by this Item is attached hereto at the end of this report beginning on page F-1 and is hereby incorporated by reference.
| ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES. |
| EX-101.INS | XBRL Instance Document | |
| EX-101.SCH | XBRL Taxonomy Extension Schema Document | |
| EX-101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
| EX-101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
| EX-101.LAB | XBRL Taxonomy Extension Labels Linkbase | |
| EX-101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
| 1 |
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Santa Clarita, State of California, on March 20, 2018.
| BIOSOLAR, INC. | ||
| By: | /s/ David Lee | |
| CHIEF EXECUTIVE OFFICER (PRINCIPAL EXECUTIVE OFFICER) AND | ||
| ACTING CHIEF FINANCIAL OFFICER (ACTING PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) | ||
Pursuant to the requirements of the Securities Act of 1933, this report has been signed by the following persons in the capacities and on the date indicated:
| SIGNATURE | TITLE | DATE | ||
| /s/ DAVID LEE | CHIEF EXECUTIVE OFFICER | March 20, 2018 | ||
| DAVID LEE | (PRINCIPAL EXECUTIVE OFFICER), ACTING CHIEF FINANCIAL OFFICER | |||
| (PRINCIPAL ACCOUNTING AND | ||||
| FINANCIAL OFFICER) AND | ||||
| CHAIRMAN OF THE BOARD | ||||
| /s/ STEVEN C. BARTLING | DIRECTOR | |||
| STEVEN C. BARTLING | March 20, 2018 | |||
| /s/ DENNIS LEPON | DIRECTOR | |||
| DENNIS LEPON | March 20, 2018 |
| 2 |
INDEX TO FINANCIAL STATEMENTS
BIOSOLAR, INC.
FINANCIAL STATEMENTS
CONTENTS
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
BioSolar, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of BioSolar, Inc. (the "Company") as of December 31, 2017 and 2016, the related statements of operations, shareholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company does not generate revenue and has negative cash flows from operations. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting in accordance with the standards of the PCAOB. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion in accordance with the standards of the PCAOB.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ LIGGETT & WEBB, P.A. | |
We have served as the Company's auditor since 2013.
New York, NY
March 19, 2018
| F-2 |
BALANCE SHEETS
| December 31, 2017 | December 31, 2016 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | 119,446 | $ | 208,629 | ||||
| Prepaid expenses | 21,644 | 22,265 | ||||||
| TOTAL CURRENT ASSETS | 141,090 | 230,894 | ||||||
| PROPERTY AND EQUIPMENT | ||||||||
| Machinery and equipment | 31,455 | 31,455 | ||||||
| Less accumulated depreciation | (23,733 | ) | (20,411 | ) | ||||
| NET PROPERTY AND EQUIPMENT | 7,722 | 11,044 | ||||||
| OTHER ASSETS | ||||||||
| Patents, net of amortization of $6,045 and $0, respectively | 69,442 | 74,787 | ||||||
| Deposit | 770 | 770 | ||||||
| TOTAL OTHER ASSETS | 70,212 | 75,557 | ||||||
| TOTAL ASSETS | $ | 219,024 | $ | 317,495 | ||||
| LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | 31,845 | $ | 16,758 | ||||
| Accrued expenses | 414,702 | 236,170 | ||||||
| Derivative liability | 5,239,073 | 5,044,897 | ||||||
| Convertible promissory notes net of debt discount of $5,340 and $100,320, respectively | 396,660 | 329,680 | ||||||
| TOTAL CURRENT LIABILITIES | 6,082,280 | 5,627,505 | ||||||
| LONG TERM LIABILITIES | ||||||||
| Convertible promissory notes net of debt discount of $351 and $35,810, respectively | 1,791,279 | 1,334,190 | ||||||
| TOTAL LONG TERM LIABILITIES | 1,791,279 | 1,334,190 | ||||||
| TOTAL LIABILITIES | 7,873,559 | 6,961,695 | ||||||
| SHAREHOLDERS' DEFICIT | ||||||||
| Preferred stock, $0.0001 par value; 10,000,000 authorized common shares | - | - | ||||||
| Common stock, $0.0001 par value; 500,000,000 authorized common shares 41,485,051 and 29,519,405 shares issued and outstanding, respectively | 4,149 | 2,952 | ||||||
| Additional paid in capital | 11,127,693 | 9,354,201 | ||||||
| Accumulated deficit | (18,786,377 | ) | (16,001,353 | ) | ||||
| TOTAL SHAREHOLDERS' DECIFIT | (7,654,535 | ) | (6,644,200 | ) | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | $ | 219,024 | $ | 317,495 | ||||
The accompanying notes are an integral part of these audited financial statements
| F-3 |
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
| Years Ended | ||||||||
| December 31, 2017 | December 31, 2016 | |||||||
| REVENUE | $ | - | $ | - | ||||
| OPERATING EXPENSES | ||||||||
| General and administrative expenses | 1,663,058 | 2,095,438 | ||||||
| Research and development | 176,306 | 226,881 | ||||||
| Depreciation and amortization | 9,368 | 3,085 | ||||||
| TOTAL OPERATING EXPENSES | 1,848,732 | 2,325,404 | ||||||
| LOSS FROM OPERATIONS BEFORE OTHER INCOME (EXPENSES) | (1,848,732 | ) | (2,325,404 | ) | ||||
| TOTAL OTHER INCOME/(EXPENSES) | ||||||||
| Interest income | 39 | 59 | ||||||
| Gain (Loss) on conversion of debt and change in derivative liability | (586,481 | ) | 3,134,813 | |||||
| Interest expense | (349,850 | ) | (609,669 | ) | ||||
| TOTAL OTHER (EXPENSES) INCOME | (936,292 | ) | 2,525,203 | |||||
| (LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES | (2,785,024 | ) | 199,799 | |||||
| Provision for income taxes | - | - | ||||||
| NET (LOSS) INCOME | $ | (2,785,024 | ) | $ | 199,799 | |||
| BASIC (LOSS) EARNINGS PER SHARE | $ | (0.08 | ) | $ | 0.01 | |||
| DILUTED (LOSS) EARNINGS PER SHARE | $ | (0.08 | ) | $ | 0.01 | |||
| WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | ||||||||
| BASIC | 35,784,211 | 22,971,319 | ||||||
| DILUTED | 35,784,211 | 39,096,319 | ||||||
The accompanying notes are an integral part of these audited financial statements
| F-4 |
STATEMENT OF SHAREHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMB ER 31, 2017 AND 2016
| Additional | ||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance at December 31, 2015 | - | $ | - | 17,995,953 | $ | 1,799 | $ | 7,474,644 | $ | (16,201,152 | ) | $ | (8,724,709 | ) | ||||||||||||||
| Issuance of common shares for converted promissory notes and accrued interest | - | - | 8,437,636 | 844 | 101,590 | - | 102,434 | |||||||||||||||||||||
| Issuance of common shares for related party converted promissory notes and accrued interest | - | - | 3,085,816 | 309 | 206,198 | - | 206,507 | |||||||||||||||||||||
| Stock based compensation | - | - | - | - | 1,571,769 | - | 1,571,769 | |||||||||||||||||||||
| Net Income for the year ended December 31, 2016 | - | - | - | - | - | 199,799 | 199,799 | |||||||||||||||||||||
| Balance at December 31, 2016 | - | 29,519,405 | 2,952 | 9,354,201 | (16,001,353 | ) | (6,644,200 | ) | ||||||||||||||||||||
| Issuance of common shares for converted promissory notes and accrued interest | - | - | 11,965,646 | 1,197 | 508,256 | - | 509,453 | |||||||||||||||||||||
| Stock based compensation | - | - | - | - | 1,265,236 | - | 1,265,236 | |||||||||||||||||||||
| Net Loss for the year ended December 31, 2017 | - | - | - | - | - | (2,785,024 | ) | (2,785,024 | ) | |||||||||||||||||||
| Balance at December 31, 2017 | - | $ | - | 41,485,051 | $ | 4,149 | $ | 11,127,693 | $ | (18,786,377 | ) | $ | (7,654,535 | ) | ||||||||||||||
The accompanying notes are an integral part of these audited financial statements
| F-5 |
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
| Years Ended | ||||||||
| December 31, 2017 | December 31, 2016 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net (Loss) Income | $ | (2,785,024 | ) | $ | 199,799 | |||
| Adjustment to reconcile net (loss) income to net cash | ||||||||
| used in operating activities | ||||||||
| Depreciation and amortization expense | 9,368 | 3,085 | ||||||
| Stock based compensation | 1,265,236 | 1,571,769 | ||||||
| (Gain) Loss on net change in derivative liability and conversion of debt | 586,481 | (3,134,813 | ) | |||||
| Amortization of debt discount recognized as interest expense | 146,279 | 443,979 | ||||||
| (Increase) Decrease in Changes in Assets | ||||||||
| Prepaid expenses | 621 | 64,678 | ||||||
| Increase (Decrease) in Changes in Liabilities | ||||||||
| Accounts payable | 15,087 | 14,703 | ||||||
| Accrued expenses | 201,469 | 164,936 | ||||||
| NET CASH USED IN OPERATING ACTIVITIES | (560,483 | ) | (671,864 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of equipment | - | (2,600 | ) | |||||
| Patent expenditures | (700 | ) | (4,517 | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | (700 | ) | (7,117 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from convertible promissory notes | 472,000 | 685,000 | ||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 472,000 | 685,000 | ||||||
| NET (DECREASE) INCREASE IN CASH | (89,183 | ) | 6,019 | |||||
| CASH, BEGINNING OF YEAR | 208,629 | 202,610 | ||||||
| CASH, END OF YEAR | $ | 119,446 | $ | 208,629 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Interest paid | $ | 1,974 | $ | 880 | ||||
| Taxes paid | $ | - | $ | - | ||||
| SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS | ||||||||
| Common stock issued for convertible notes and accrued interest | $ | 509,453 | $ | 102,434 | ||||
| Common stock issued for related party convertible notes and accrued interest | $ | - | $ | 206,507 | ||||
The accompanying notes are an integral part of these audited financial statements
| F-6 |
NOTES TO FINANICAL STATEMENTS – AUDITED
YEARS ENDED DECEMBER 31, 2017 AND 2016
| 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 engaged in the development of innovative technologies and materials that will reduce the cost per watt of storing electrical energy. We previously developed BioBacksheetR, a high performance green back sheet for Photovoltaic solar modules. We are currently developing technologies and materials for storing electrical energy produced by Photovoltaic solar modules as well as other means. We are focusing our research and product development efforts on silicon anode additive material for next generation high capacity lithium-ion batteries.
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, 2017, the Company did not generate any revenue, incurred a net loss of $2,785,024 and used cash in operations of $560,483. As of December 31, 2017, the Company had a working capital deficiency of $5,941,190 and a shareholders’ deficit of $7,654,535. 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, 2017 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, 2017, 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 stock holders, in case of equity financing.
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
Revenue Recognition
The Company will recognize revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. To date, the Company has not had significant revenues and is in the development stage.
Cash and Cash Equivalent
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements, include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, derivative liabilities and the fair value of stock options. Actual results could differ from those estimates.
Research and Development
Research and development costs are expensed as incurred. Total research and development costs were $176,306 and $226,881 for the years ended December 31, 2017 and 2016, respectively.
| F-7 |
BIOSOLAR, INC.
NOTES TO FINANICAL STATEMENTS – AUDITED
YEARS ENDED DECEMBER 31, 2017 AND 2016
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
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. During the years ended December 31, 2017 and 2016, the Company reviewed the capitalized patents for impairment in accordance with ASC 350, and determined there was no impairment. Intangible assets that have finite useful lives continue to be amortized over their useful lives
| Useful Lives | 2017 | 2016 | |||||||||
| Patents | $ | 75,487 | $ | 74,787 | |||||||
| Less accumulated amortization | 15 years | (6,045 | ) | - | |||||||
| $ | 69,442 | $ | 74,787 | ||||||||
The Company recognized amortization expense of $6,045 and $0 for the years ended December 31, 2017 and 2016.
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, 2017 and 2016 was $3,323 and $3,085, 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.
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 uses the Black Scholes pricing model to value its stock option awards which incorporate the Company’s stock price, volatility, U.S. risk-free rate, dividend rate, and estimated life. On March 24, 2015, the Company granted 2,450,000 stock options with an exercise price of $0.09 per share, and on September 2, 2015 the Company granted an additional 13,500,000 stock options with an exercise price of $0.26 per share. The options will vest 1/25 on monthly basis, starting April 24, 2015 and October 1, 2015, respectively, and terminate seven (7) years from the date of grant or upon termination of employment.
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.
| F-8 |
BIOSOLAR, INC.
NOTES TO FINANICAL STATEMENTS – AUDITED
YEARS ENDED DECEMBER 31, 2017 AND 2016
| 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).
For the year ended December 31, 2017, the Company’s diluted loss per share is the same as the basic loss per share, and the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss. The Company excluded 15,975,000 stock options, and the shares issuable from the convertible debt of $2,193,630, because their impact was antidilutive.
For the year ended December 31, 2016, the Company calculated the dilutive impact of the outstanding stock options of 1,650,000, warrants of 150,000, and the convertible debt of $1,800,000, which is convertible into shares of common stock. The stock options and warrants were included in the calculation of net earnings per share, because their impact was dilutive.
| For the years ended | |||||||||
| December 31, | |||||||||
| 2017 | 2016 | ||||||||
| Income (Loss) to common shareholders (Numerator) | $ | (2,785,024 | ) | $ | 199,799 | ||||
| Basic weighted average number of common shares outstanding (Denominator) | 35,784,211 | 22,971,319 | |||||||
| Diluted weighted average number of common shares outstanding (Denominator) | 35,784,211 | 39,096,319 | |||||||
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, 2017, the amounts reported for cash, inventory, prepaid expenses, accounts payable, and accrued expenses, approximate the fair value because of their short maturities.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at December 31, 2017 and 2016:
| Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||
| Derivative Liability | |||||||||||||||||
| Total Liabilities measured at fair value as of December 31, 2017 | $ | 5,239,073 | $ | - | $ | - | $ | 5,239,073 | |||||||||
| Total Liabilities measured at fair value as of December 31, 2016 | $ | 5,044,897 | $ | - | $ | - | $ | 5,044,897 | |||||||||
| F-9 |
BIOSOLAR, INC.
NOTES TO FINANICAL STATEMENTS – AUDITED
YEARS ENDED DECEMBER 31, 2017 AND 2016
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
The following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair value:
| Balance as of January 1, 2016 | $ | 7,878,599 | |||
| Fair value of derivative liabilities issued | 301,111 | ||||
| Loss on conversion of debt and change in derivative liability | (3,134,813 | ) | |||
| Balance as of December 31, 2016 | $ | 5,044,897 | |||
| Fair value of derivative liabilities issued | 15,840 | ||||
| Gain on conversion of debt and change in derivative liability | 173,338 | ||||
| Balance as of December 31, 2017 | $ | 5,239,073 |
Recently Issued Accounting Pronouncements
In May 2017, FASB issued accounting standards update ASU-2017-09, “Compensation-Stock Compensation” (Topic 718) –Modification Accounting”, to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in this ASU are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period for public entities for reporting periods for which financial statements have not yet been issued, and all other entities for reporting periods for which financial statements have not yet been made available for issuance. The Company is currently evaluating the impact of the adoption of ASU 2017-09 on the Company’s financial statements.
In August 2017, FASB issued accounting standards update ASU-2017-12, “D” (Topic 815) – “Targeted Improvements to Accounting for Hedging Activities”, to require an entity to present the earnings effect of the hedging instrument in the same statement line item in which the earnings effect of the hedged item is reported. The amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods with the fiscal years beginning after December 15, 2020. Early adoption is permitted in any interim period after issuance of the update. The Company is currently evaluating the impact of the adoption of ASU 2017-12 on the Company’s financial statements.
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements.
| 3. | CAPITAL STOCK |
During the year ended December 31, 2017, the Company issued 11,965,646 shares of common stock upon conversion of convertible promissory notes in the amount of $78,370, plus accrued interest of $22,939, with an aggregate fair value loss of $408,144 at prices ranging from $0.0350 and $0.0549 per share upon conversion
During the year ended December 31, 2016, the Company issued 8,437,636 shares of common stock at prices of $0.00847 and $0.01333 per share upon conversion of $84,500 in convertible promissory notes, including $17,934 in accrued interest and issued 3,085,816 shares of common stock at a price of $0.056 to $0.115 per share upon conversion of related party convertible promissory notes with a fair value of $185,000, plus accrued interest of $21,507.
| F-10 |
BIOSOLAR, INC.
NOTES TO FINANICAL STATEMENTS – AUDITED
YEARS ENDED DECEMBER 31, 2017 AND 2016
| 4. | STOCK OPTIONS AND WARRANTS |
Stock Options
The Company did not grant any stock options during the years ended December 31, 2017 and 2016, respectively.
| 2017 | 2016 | ||||||||||||||||
| Number of Options | Weighted average exercise price | Number of Options | Weighted average exercise price | ||||||||||||||
| Outstanding as of the beginning of the years | 15,975,000 | $ | 0.23 | 15,978,333 | $ | 0.23 | |||||||||||
| Granted | - | $ | - | - | $ | - | |||||||||||
| Exercised | - | $ | - | - | $ | - | |||||||||||
| Expired | - | $ | - | (3,333 | ) | $ | 4.05 | ||||||||||
| Outstanding as of the end of the years | 15,975,000 | $ | 0.23 | 15,975,000 | $ | 0.23 | |||||||||||
| Exercisable as of the end of the years | 15,975,000 | $ | 0.23 | 10,183,000 | $ | 0.21 | |||||||||||
The weighted average remaining contractual life of options outstanding as of December 31, 2017 and 2016 was as follows:
| 12/31/2017 | 12/31/2016 | ||||||||||||||||||||||||||||||
| Exercisable Price | Stock Options Outstanding | Stock Options Exercisable | Weighted Average Remaining Contractual Life (years) | Exercisable Price | Stock Options Outstanding | Stock Options Exercisable | Weighted Average Remaining Contractual Life (years) | ||||||||||||||||||||||||
| $ | 0.40 | 25,000 | 25,000 | 0.16 | $ | 0.40 | 25,000 | 25,000 | 1.17 | ||||||||||||||||||||||
| $ | 0.09 | 2,450,000 | 2,450,000 | 4.23 | $ | 0.09 | 2,450,000 | 2,058,000 | 5.23 | ||||||||||||||||||||||
| $ | 0.26 | 13,500,000 | 13,500,000 | 4.67 | $ | 0.26 | 13,500,000 | 8,100,000 | 5.70 | ||||||||||||||||||||||
| 15,975,000 | 15,975,000 | 15,975,000 | 10,183,000 | ||||||||||||||||||||||||||||
Stock Options
The stock-based compensation expense recognized in the statement of operations during the years ended December 31, 2017 and 2016, related to the granting of these options was $1,265,236 and $1,571,769, respectively.
As of December 31, 2017, there was no intrinsic value with regards to the outstanding options.
Warrants
During the year ended December 31, 2017, 150,000 purchase warrants expired in October 2017. The Company granted no warrants during the year ended December 31, 2017. The were no warrants outstanding as of December 31, 2017.
| 2017 | 2016 | ||||||||||||||||
| Number of Warrants | Weighted average exercise price | Number of Warrants | Weighted average exercise price | ||||||||||||||
| Outstanding as of the beginning of the years | $ | 150,000 | $ | 0.55 | $ | 245,000 | $ | 0.97 | |||||||||
| Granted | - | - | - | ||||||||||||||
| Exercised | - | - | - | ||||||||||||||
| Expired | (150,000 | ) | $ | 0.55 | $ | (95,000 | ) | $ | 1.80 | ||||||||
| Outstanding as of the end of the years | $ | - | $ | - | $ | 150,000 | $ | 0.55 | |||||||||
| Exercisable at the end of years | $ | - | $ | - | $ | 150,000 | $ | 0.55 | |||||||||
| 5. | CONVERTIBLE PROMISSORY NOTES |
As of December 31, 2017, the outstanding convertible promissory notes are summarized as follows:
| Convertible Promissory Notes, net of debt discount | $ | 2,187,939 | |||
| Less current portion | 396,660 | ||||
| Total long-term liabilities | $ | 1,791,279 |
| F-11 |
BIOSOLAR, INC.
NOTES TO FINANICAL STATEMENTS – AUDITED
YEARS ENDED DECEMBER 31, 2017 AND 2016
| 5. | CONVERTIBLE PROMISSORY NOTES (Continued) |
Maturities of long-term debt for the next three years are as follows:
| Year Ending December 31, | Amount | ||||
| 2019 | $ | 306,630 | |||
| 2020 | 730,000 | ||||
| 2021 | 754,649 | ||||
| $ | 1,791,279 | ||||
At December 31, 2017, the $2,193,630 in convertible promissory notes had a remaining debt discount of $5,691, leaving a net balance of $2,187,939.
On May 2, 2014, the Company entered into a securities purchase agreement, providing for the sale by the Company of a 10% unsecured convertible note (the “May Note”) in the aggregate principal amount of up to $500,000, to be advanced in amounts at the lender’s discretion. Upon execution of the securities purchase agreement, the Company received a tranche in the amount of $50,000. On various dates, the Company received additional tranches in the aggregate sum of $450,000, for a total aggregate sum of $500,000. As of December 31, 2015, the remaining principal balance was $467,500. During the year ended December 31, 2017, the Company issued 11,965,646 shares of common stock for principal in the amount of $78,370, plus accrued interest of $22,939, leaving a principal balance of $306,630. Each tranche matures eighteen (18) months from the effective date of each tranche, which was extended on January 12, 2016 to sixty (60) months, with maturity dates ranging from June 12, 2019 to December 21, 2019. The May Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of a) the lesser of $0.25 per share of common stock, b) fifty percent (50%) of the average three (3) lowest trading prices of three (3) separate trading days recorded after the effective date, or c) the lowest effective price granted to any person or entity after the effective date to acquire common stock. The fair value of the May Note has been determined by using the Binomial lattice formula with an expected life of sixty (60) months from the effective date of each tranche.
On January 30, 2015, the Company entered into a securities purchase agreement, providing for the sale by the Company of a 10% unsecured convertible note (the “January Note”) in the aggregate principal amount of up to $500,000, to be advanced in amounts at the lender’s discretion. Upon execution of the securities purchase agreement, the Company received a tranche in the amount of $50,000. On various dates, the Company received additional tranches in the aggregate sum of $450,000. The principal balance at December 31, 2017 was $500,000. Each tranche matured eighteen (18) months from the effective date of each tranche, which was extended on January 12, 2016 to sixty (60) months from the effective date of each tranche, with maturity dates ranging from January 29, 2020 to August 25, 2020. The January Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of a) the lesser of $0.15 per share of common stock, b) fifty percent (50%) of the lowest trade price recorded since the original effective date of the January Note, or c) the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. The fair value of the January Note has been determined by using the Binomial lattice formula with an expected life of sixty (60) months from the effective date of each tranche. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $25,898 during the year ended December 31, 2017.
On October 1, 2015, the Company entered into a securities purchase agreement, providing for the sale by the Company of a 10% unsecured convertible note (the “October Note”) in the aggregate principal amount of up to $500,000, to be advanced in amounts at the lender’s discretion. Upon execution of the securities purchase agreement, the Company received a tranche in the amount of $90,000. On various dates, the Company received additional tranches in the aggregate sum of $395,000. The principal balance at December 31, 2017 was $485,000. Each tranche matures twelve (12) months from the effective date of each tranche, which was extended on October 13, 2016 to sixty (60) months from the effective date of each tranche, with maturity dates ranging from October 1, 2020 to March 9, 2021. The October Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of a) the lesser of $0.25 per share of common stock, b) fifty percent (50%) of the lowest trade price recorded since the original effective date of the October Note, or c) the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. The fair value of the October Note has been determined by using the Binomial lattice formula with an expected life of sixty (60) months. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $9,912 during the year ended December 31, 2017.
On April 5, 2016, the Company entered into a securities purchase agreement, providing for the sale by the Company of a 10% unsecured convertible note (the “April Note”) in the aggregate principal amount of up to $500,000, to be advanced in amounts at the lender’s discretion. Upon execution of the securities purchase agreement, the Company received a tranche in the amount of $48,000. On various dates, the Company received additional tranches in the aggregate sum of $452,000. The principal balance at December 31, 2017 was $500,000. Each tranche matures twelve (12) months from the effective date of each tranche through November 15, 2017. The April Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of a) the lesser of $0.13 per share of common stock, b) fifty percent (50%) of the lowest trade price recorded since the original effective date of the April Note, or c) the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. The fair value of the April Note has been determined by using the Binomial lattice formula with an expected life of sixty (60) months. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $104,524 during the year ended December 31, 2017.
| F-12 |
BIOSOLAR, INC.
NOTES TO FINANICAL STATEMENTS – AUDITED
YEARS ENDED DECEMBER 31, 2017 AND 2016
| 5. | CONVERTIBLE PROMISSORY NOTES (Continued) |
On March 20, 2017, the Company entered into a securities purchase agreement, providing for the sale by the Company of a 10% unsecured convertible note (the “March Note”) in the aggregate principal amount of up to $500,000, to be advanced in amounts at the lender’s discretion. Upon execution of the securities purchase agreement, the Company received a tranche in the amount of $25,000. On various dates during the year ended December 31, 2017, the Company received additional tranches in the aggregate sum of $377,000. The principal balance as of December 31, 2017 was $402,000. Each tranche matures twelve (12) months from the effective date of each tranche, with an extension of sixty (60) months from each tranche. The March Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of a) the lesser of $0.13 per share of common stock, b) fifty percent (50%) of the lowest trade price recorded since the original effective date of the March Note, or c) the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. The fair value of the March Note has been determined by using the Binomial lattice formula with an expected life of twelve (12) months. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $5,945 during the year ended December 31, 2017.
| 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, 2017, 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 $15,840, 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, 2017, the Company converted $78,370 in principal of convertible notes, plus accrued interest of $22,939. As a result of the conversion of these notes and the change in fair value of the remaining notes, the Company recorded a loss on net change in derivative and conversion of debt in the amount of $586,481 in the statement of operations for the year ended December 31, 2017. At December 31, 2017, the fair value of the derivative liability was $5,239,073.
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:
| 12/31/2017 | |||||
| Risk free interest rate | 1.39% - 2.20 | % | |||
| Stock volatility factor | 74.0% - 136 | % | |||
| Weighted average expected option life | 1 years - 5 years | ||||
| Expected dividend yield | None | ||||
7. DEFERRED TAXES
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 2015.
Deferred income taxes have been provided by temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. To the extent allowed by GAAP, we provide valuation allowances against the deferred tax assets for amount when the realization is uncertain. Included in the balance at December 31, 2017 and 2016, 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.
The Company's policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the periods ended December 31, 2017 and 2016, the Company did not recognize interest or penalties.
| F-13 |
BIOSOLAR, INC.
NOTES TO FINANICAL STATEMENTS – AUDITED
YEARS ENDED DECEMBER 31, 2017 AND 2016
| 7. | DEFERRED TAXES (Continued) |
At December 31, 2017, the Company had net operating loss carry-forwards of approximately $7,925,000, which expires 20 years after the NOL year. No tax benefit has been reported in the December 31, 2017 and 2016 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 income tax rate to pretax income from continuing operations for the years ended December 31, 2017 and 2016 due to the following:
| 2017 | 2016 | ||||||||
| Book income (loss) | $ | (1,114,010 | ) | $ | 79,830 | ||||
| Depreciation | 680 | (1,590 | ) | ||||||
| Meals and entertainment | 240 | 160 | |||||||
| Non-deductible non-cash charges | 879,830 | (380,530 | ) | ||||||
| Valuation Allowance | 233,260 | 302,130 | |||||||
| 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 liabilities consist of the following components as of December 31, 2017 and 2016:
| 2017 | 2016 | ||||||||
| Deferred tax assets: | |||||||||
| NOL carryover | $ | (3,170,060 | ) | $ | (2,947,120 | ) | |||
| R & D credit | 91,630 | 87,480 | |||||||
| Depreciation | 10,740 | 10,740 | |||||||
| Deferred tax liabilites: | |||||||||
| Depreciation | - | - | |||||||
| Less Valuation Allowance | 3,067,690 | 2,848,900 | |||||||
| 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.
The Company’s tax returns for the previous three years remain open for audit by the respective tax jurisdictions.
| F-14 |
BIOSOLAR, INC.
NOTES TO FINANICAL STATEMENTS – AUDITED
YEARS ENDED DECEMBER 31, 2017 AND 2016
| 8. | COMMIMENT AND CONTINGENCIES |
On October 2, 2017, the Company amended its lease for office space by extending the lease to October 31, 2018.
During the year ended December 31, 2017, we have a new material commitment for capital expenditures in the form of a sponsored research agreement with North Carolina Agricultural and Technical State University during the next twelve months. On August 24, 2017, the Company extended its contract for a period of September 12, 2017 through September 11, 2018, and the total cost shall not exceed the sum of $159,610. The commitment is financed by the issuance of equity or debt securities of the Company.
| 9. | SUBSEQUENT EVENTS |
Management has evaluated subsequent events according to the requirements of ASC TOPIC 855 and has determined that there are the following subsequent events:
In January and February 2018, the Company received two tranches for an aggregate amount of $98,000 pursuant to the securities purchase agreement entered into on March 20, 2017. The securities purchase agreement provided for the issuance of the March Note in the aggregate principal amount of up to $500,000. The March Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of a) the lesser of $0.13 per share of common stock, b) fifty percent (50%) of the lowest trade price recorded on any trade day after the effective date or c) the lowest effective price per share granted to any person or entity after the effective date to acquire common stock.
During the month of January and February 2018, the Company issued 5,023,283 shares of common stock upon conversion of a convertible promissory note for principal in the amount of $28,190, plus accrued interest of $9,734.
On February 26, 2018, the Company received $15,000 in consideration upon the execution of a securities purchase agreement for the issuance of a 10% unsecured convertible note (“February Note”) in the aggregate principal amount of up to $500,000. The February Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of a) the lesser of $0.03 per share of common stock, b) fifty percent (50%) of the lowest trade price recorded on any trade day after the effective date or c) the lowest effective price per share granted to any person or entity after the effective date to acquire common stock.
| F-15 |