The accompanying notes are an integral part
of these unaudited condensed financial statements.
The accompanying notes are an integral part
of these unaudited condensed financial statements.
The accompanying notes are an integral part
of these unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
– UNAUDITED
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND
2019
The accompanying unaudited condensed
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included.
Operating results for the six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2020. For further information refer to the financial statements and footnotes thereto included in
the Company’s Form 10-K for the year ended December 31, 2019.
Going Concern
The accompanying condensed financial
statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization
of assets and liabilities and commitments in the normal course of business. The accompanying unaudited financial statements do
not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company has not generated
revenue, and has negative cash flows from operations, which raise substantial doubt about the Company’s ability to continue
as a going concern. The ability of the Company to continue as a going concern and appropriateness of using the going concern basis
is dependent upon, among other things, additional cash infusion. The Company has historically obtained funds through private placements
offerings of equity and debt. Management believes that it will be able to continue to raise funds by sale of its securities to
its existing shareholders and prospective new investors to provide the additional cash needed to meet the Company’s obligations
as they become due, and will allow the development of its core of business. No assurance can be given that any future financing
will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able
to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial
dilution for our stock holders, in case of equity financing.
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
This summary of significant
accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial
statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity.
These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently
applied in the preparation of the financial statements.
Revenue Recognition
The Company will recognize revenue
when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and
risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably
assured. To date, the Company has not had significant revenues and is in the development stage.
Cash and Cash Equivalent
The Company considers all highly
liquid investments with an original maturity of three months or less to be cash equivalents.
Use of Estimates
The preparation of financial
statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements,
include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, derivative liabilities and
the fair value of stock options. Actual results could differ from those estimates.
Intangible Assets
The Company has patent applications
to protect the inventions and processes behind its proprietary bio-based back-sheet, a protective covering for the back of photovoltaic
solar modules traditionally made from petroleum-based film. Intangible assets that have finite useful lives continue to be amortized
over their useful lives.
|
|
Useful Lives
|
|
6/30/20
|
|
|
12/31/19
|
|
Patents
|
|
|
|
$
|
45,336
|
|
|
$
|
45,336
|
|
Less accumulated amortization
|
|
15 years
|
|
|
(13,601
|
)
|
|
|
(12,090
|
)
|
|
|
|
|
$
|
31,735
|
|
|
$
|
33,246
|
|
Amortization expense for the six months
ended June 30, 2020 and the year ended December 31, 2019 was $1,511 and $1,511, respectively.
BIOSOLAR, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
– UNAUDITED
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND
2019
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
Stock-Based Compensation
The Company measures the cost
of employee services received in exchange for an equity award based on the grant-date fair value of the award. All grants under
our stock-based compensation programs are accounted for at fair value and that cost is recognized over the period during which
an employee, consultant, or director are required to provide service in exchange for the award (the vesting period). Compensation
expense for options granted to employees and non-employees is determined in accordance with the standard as the fair value of the
consideration received or the fair value of the equity instruments issued, whichever is more reliably measured. Compensation expense
for awards granted is re-measured each period.
Determining the appropriate
fair value of the stock-based compensation requires the input of subjective assumptions, including the expected life of the stock-based
payment and stock price volatility. The Company used Black Scholes to value its stock option awards which incorporated the
Company’s stock price, volatility, U.S. risk-free rate, dividend rate, and estimated life. The stock options terminate seven
(7) years from the date of grant or upon termination of employment. As of June 30, 2020, 15,950,000 stock options are outstanding.
Net Earnings (Loss) per Share
Calculations
Net earnings (Loss) per share
dictates the calculation of basic earnings (loss) per share and diluted earnings per share. Basic earnings (loss) per share are
computed by dividing by the weighted average number of common shares outstanding during the year. Diluted net earnings (loss) per
share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the effect of
stock options and stock based awards (Note 4), plus the assumed conversion of convertible debt (Note 5).
For the six months ended June
30, 2020, the Company’s diluted loss per share is the same as the basic loss per share, and the inclusion of any potential
shares would have had an anti-dilutive effect due to the Company generating a loss. The Company has included 15,950,000 stock options
and the shares issuable from convertible debt of $2,739,790, because their impact was dilutive.
For the six months ended June
30, 2019, the Company’s diluted loss per share is the same as the basic loss per share, and the inclusion of any potential
shares would have had an anti-dilutive effect due to the Company generating a loss. The Company has excluded 15,950,000 stock options,
and the shares issuable from convertible debt of $2,839,026, because their impact was anti-dilutive.
Fair Value of Financial Instruments
Fair Value of Financial Instruments,
requires disclosure of the fair value information, whether recognized in the balance sheet, where it is practicable to estimate
that value. As of June 30, 2020, the amounts reported for cash, inventory, prepaid expenses, accounts payable, and accrued expenses,
approximate the fair value because of their short maturities.
Fair value is defined as the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring
fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities
(level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
|
●
|
Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
|
|
●
|
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
|
|
●
|
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
|
BIOSOLAR, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
– UNAUDITED
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND
2019
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
We measure certain financial
instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows
at June 30, 2020:
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liability
|
|
$
|
9,353,713
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
9,353,713
|
|
Total Liabilities measured at fair value
|
|
$
|
9,353,713
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
9,353,713
|
|
The following is a reconciliation of the derivative
liability for which Level 3 inputs were used in determining the approximate fair value:
Balance as of December 31, 2019
|
|
$
|
8,919,202
|
|
Fair value of derivative liabilities issued
|
|
|
265,500
|
|
Gain on change in derivative liability
|
|
|
(169,011
|
)
|
Balance as of June 30, 2020
|
|
$
|
9,353,713
|
|
Recently Issued Accounting
Pronouncements
Management does not believe
that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the
accompanying condensed financial statements.
During the six months ended June
30, 2020, the Company issued 148,822,552 shares of common stock upon conversion of convertible promissory notes in the amount of
$379,744, plus accrued interest of $32,490, and other fees of $1,500 at prices ranging from $0.00140 - $0.0072. The Company had
no gain or loss upon conversion, since the conversions were made under the terms of the agreements.
During the six months ended
June 30, 2019, the Company issued 27,394,459 shares of common stock upon conversion of convertible promissory notes in the amount
of $259,134, plus accrued interest of $27,776, with an aggregate fair value loss of $404,741 at prices ranging from $0.0192 - $0.0341.
Stock Options
The Company did not grant any
stock options during the three months ended June 30, 2020 and 2019, respectively.
|
|
6/30/2020
|
|
|
6/30/2019
|
|
|
|
Number of Options
|
|
|
Weighted average exercise
price
|
|
|
Number of Options
|
|
|
Weighted average exercise
price
|
|
Outstanding as of the beginning of the periods
|
|
|
15,950,000
|
|
|
$
|
0.23
|
|
|
|
15,950,000
|
|
|
$
|
0.23
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of the end of the periods
|
|
|
15,950,000
|
|
|
$
|
0.23
|
|
|
|
15,950,000
|
|
|
$
|
0.23
|
|
Exercisable as of the end of the periods
|
|
|
15,950,000
|
|
|
$
|
0.23
|
|
|
|
15,950,000
|
|
|
$
|
0.23
|
|
BIOSOLAR, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
– UNAUDITED
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND
2019
|
4.
|
STOCK
OPTIONS (Continues)
|
The weighted average remaining
contractual life of options outstanding as of June 30, 2020 and 2019 was as follows:
6/30/2020
|
|
|
6/30/2019
|
|
Exercisable Price
|
|
|
Stock
Options Outstanding
|
|
|
Stock
Options Exercisable
|
|
|
Weighted Average Remaining Contractual Life (years)
|
|
|
Exercisable Price
|
|
|
Stock Options Outstanding
|
|
|
Stock Options Exercisable
|
|
|
Weighted Average Remaining Contractual Life (years)
|
|
$
|
0.09
|
|
|
|
2,450,000
|
|
|
|
2,450,000
|
|
|
|
1.73
|
|
|
$
|
0.09
|
|
|
|
2,450,000
|
|
|
|
2,450,000
|
|
|
|
2.73
|
|
$
|
0.26
|
|
|
|
13,500,000
|
|
|
|
13,500,000
|
|
|
|
2.18
|
|
|
$
|
0.26
|
|
|
|
13,500,000
|
|
|
|
13,500,000
|
|
|
|
3.18
|
|
|
|
|
|
|
15,950,000
|
|
|
|
15,950,000
|
|
|
|
|
|
|
|
|
|
|
|
15,950,000
|
|
|
|
15,950,000
|
|
|
|
|
|
The stock-based compensation expense recognized in
the statement of operations during the six months ended June 30, 2020 and 2019, related to the granting of these options was $0
and $0, respectively.
As of June 30, 2020 and 2019, respectively, there
was no intrinsic value with regards to the outstanding options.
|
5.
|
CONVERTIBLE
PROMISSORY NOTES
|
As of June 30, 2020, the outstanding convertible
promissory notes net of debt discount are summarized as follows:
Convertible Promissory Notes, net of debt discount
|
|
$
|
2,539,374
|
|
Less current portion
|
|
|
785,694
|
|
Total long-term liabilities
|
|
$
|
1,753,680
|
|
Maturities of long-term debt, net of debt
discount for the next four years are as follows:
June 30,
|
|
Amount
|
|
2021
|
|
|
986,110
|
|
2022
|
|
|
581,680
|
|
2023
|
|
|
1,047,000
|
|
2024
|
|
|
125,000
|
|
|
|
$
|
2,739,790
|
|
At June 30, 2020, the Company
had $2,739,790 in convertible promissory notes, which had a remaining debt discount of $200,416, leaving a net balance of $2,739,790.
The Company issued an unsecured
convertible promissory note (the “May 2014 Note”), in the amount of $500,000 on May 2, 2014, the effective date. The
May Note shall mature on May 2, 2022. The May 2014 Note bears interest at 10% per annum. The May 2014 Note is convertible into
shares of the Company’s common stock at a conversion price of the lesser of a) $0.25 per share of common stock (subject to
adjustment for stock splits, dividends, combinations and other similar transactions) or b) fifty percent (50%) of the average three
(3) lowest trading prices of three (3) separate trading days recorded after the effective date, or c) the lowest effective price
granted to any person or entity after the effective date to acquire common stock. If the Borrower fails to deliver shares in accordance
with the time frame of three (3) business days, the Lender, at any time prior to selling all of those shares, may rescind any portion,
in whole or in part of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned
to the Principal Sum with the rescinded conversion shares returned to the Borrower. In addition, for each conversion, in the event
shares are not delivered by the fourth business day (inclusive of the day of conversion), a penalty of $1,500 per day shall be
assessed for each day after the third business day (inclusive of the day of the conversion) until the shares are delivered. The
fair value of the May 2014 Note has been determined by using the Binomial lattice formula from the effective date of each tranche.
During the six months ended June 30, 2020, the Company issued 24,924,555 shares of common stock upon conversion of principal in
the amount of $26,470, plus accrued interest of $14,314. The May 2014 Note was converted based on the terms of the agreement, and
the Company did not recognize a gain or loss on the conversion in the financials. The May 2014 Note was converted based on the
terms of the agreement and no gain or loss was recognized in the financials. As of June 30, 2020, the remaining balance of the
May 2014 Note was $71,680.
BIOSOLAR, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
– UNAUDITED
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND
2019
|
5.
|
CONVERTIBLE
PROMISSORY NOTES (Continued)
|
The Company issued various unsecured
convertible promissory notes (the “2015-2018 Notes”) in the aggregate amount of $2,500,000 on various dates from January
30, 2015 through January 17, 2019, the effective dates. The 2015-2018 Notes were extended and shall mature on dates from January
30, 2023 thru January 17, 2024. The 2015-2018 Notes bear an interest rate of 10% per annum. The 2015-2018 Notes are convertible
into shares of the Company’s common stock at conversion prices ranging from the a) the lesser of $0.03 to $0.25 per share
of common stock (subject to adjustment for stock splits, dividends, combinations and other similar transactions) or b) fifty percent
(50%) of the lowest trade price recorded since the original effective date, or c) the lowest effective price per share granted
to any person or entity after the effective date to acquire common stock. If the Borrower fails to deliver shares in accordance
within the time frame of three (3) business days, the Lender, at any time prior to selling all of those shares, may rescind any
portion, in whole or in part of that particular conversion attributable to the unsold shares and have the rescinded conversion
amount returned to the Principal Sum with the rescinded conversion shares returned to the Borrower. In addition, for each conversion,
in the event shares are not delivered by the fourth business day (inclusive of the day of conversion), a penalty of $1,500 per
day shall be assessed for each day after the third business day (inclusive of the day of the conversion) until the shares are delivered.
The fair value of the 2015-2018 Notes have been determined by using the Binomial lattice formula from the effective date of each
tranche. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $801 during
the six months ended June 30, 2020. As of June 30, 2020, the 2015-2018 Notes had a remaining aggregate balance of $2,340,000.
The Company issued various unsecured
convertible promissory notes (the “Feb-Apr 2019 Notes”) in the aggregate principal amount of $107,000. The Company
paid an original issue discount of $4,000 and received funds in the amount of $103,000. The Feb 2019 tranche was extended to August
22, 2020. The Apr 2019 Note matures on October 11, 2020. The Feb-Apr 2019 Notes bear interest at 10% per annum. The Feb-Apr 2019
Notes may be converted into shares of the Company’s common stock at a conversion price of sixty-one (61%) percent of the
lowest one (1) day trading price during the fifteen (15)-trading-day period prior to the conversion date. The parties agree that
if the shares of common stock issuable upon conversion of these Feb-Apr 2019 Notes are not delivered by the deadline, the Borrower
shall pay to the holder of the Feb-Apr 2019 Notes $2,000 per day in cash, for each day beyond the deadline that the Borrower fails
to deliver such common stock. The conversion feature of the Feb-Apr 2019 Notes was considered a derivative in accordance with current
accounting guidelines because of the reset conversion features of the Feb-Apr 2019 Notes. The fair value of the Feb-Apr 2019 Notes
has been determined by using the Binomial lattice formula from the effective date of the notes. During the period ended June 30,
2020, the Company issued 27,903,524 shares of common stock upon conversion of $63,274 in principal, accrued interest of $3,676
and $1,500 in other fees. The Feb-Apr 2019 Notes were converted based on the terms of the agreement and the Company did not recognized
a gain or loss on conversion in the financials. The Company recorded amortization of debt discount, which was recognized as interest
expense in the amount of $21,801 during the six months ended June 30, 2020. The Feb-Apr 2019 Notes as of June 30, 2020, had
a remaining balance of $9,110.
The
Company issued an unsecured convertible promissory note on July 16, 2019 (the “July 2019 Note”), in the aggregate principal
amount of $53,000. The Company paid an original issue discount of $3,000 and received funds in the amount of $50,000. The July
2019 Note matured on July 16, 2020. The July 2019 Note bears interest at 10% per annum. The July 2019 Note may be converted into
shares of the Company’s common stock at a conversion price of sixty-one (61%) percent of the lowest average two (2) day closing
bid prices during the fifteen (15) trading days prior to the conversion date. The parties agree that if shares of the common stock
issuable upon conversion of these Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day
in cash, for each day beyond the deadline that the Borrower fails to deliver such common stock. The conversion feature of the July
2019 Note was considered a derivative in accordance with current accounting guidelines because of the reset conversion features
of the July 2019 Note. The fair value of the July 2019 Notes has been determined by using the Binomial lattice formula from the
effective date of the notes. During the period ended June 30, 2020, the Company issued 8,248,918 shares of common stock upon conversion
of principal in the amount of $53,000, plus interest of $2,650. The July 2019 Note was converted based on the terms of the agreement,
and the Company did not recognize a gain or loss on conversion in the financials. The Company recorded amortization of debt discount,
which was recognized as interest expense in the amount of $28,672 during the six months ended June 30, 2020. The July 2019
Note as of June 30, 2020 had a remaining balance of $0.
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 August 8, 2020. 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 recorded amortization of debt discount, which was recognized as interest expense in
the amount of $26,604 during the six months ended June 30, 2020. The August 2019 Note had a remaining balance of $53,500 as
of June 30, 2020.
BIOSOLAR, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
– UNAUDITED
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND
2019
|
5.
|
CONVERTIBLE
PROMISSORY NOTES (Continued)
|
The Company issued an unsecured
convertible promissory note on August 29, 2019 (the “August 29, 2019 Note”), in the aggregate principal amount of $63,000.
The Company paid an original issue discount of $3,000 and received funds in the amount of $60,000. The August 29, 2019 Note matures
on August 29, 2020. The August 29, 2019 Note bears an interest at 10% per annum. The August 29, 2019 Note may be converted into
shares of the Company’s common stock at a conversion price of sixty-one (61%) percent of the lowest average two (2) day closing
bid prices during the fifteen (15) trading days prior to the conversion date. The parties agree that if shares of the common stock
issuable upon conversion of these Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day
in cash, for each day beyond the deadline that the Borrower fails to deliver such common stock. The conversion feature of the August
29, 2019 Note was considered a derivative in accordance with current accounting guidelines because of the reset conversion features
of the August 29, 2019 Note. The fair value of the August 29, 2019 Note has been determined by using the Binomial lattice formula
from the effective date of the notes. During the six months ended June 30, 2020, the Company issued 13,624,762 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 six months ended June 30, 2020. The August 2019
Note as of June 30, 2020 has a remaining balance of $0.
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 six months ended June 30, 2020, the Company issued 28,413,462 shares of common stock upon conversion of principal of
$63,000, plus accrued interest of $3,150. The Oct 2019 Note was converted based on the terms of the agreement and the Company did
not recognized a gain or loss on conversion in the financials. The Company recorded amortization of debt discount, which was recognized
as interest expense in the amount of $47,336 during the six months ended June 30, 2020. The Oct 2019 Note as of June 30, 2020,
had a remaining balance of $0.
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 six months ended June 30, 2020, the Company issued 24,588,385 shares of common stock upon conversion of $58,000 in principal,
plus accrued interest of $ 2,900. The Nov 2019 Note was converted based on the terms of the agreement and the Company did not recognize
a gain or loss on conversion in the financials. The Company recorded amortization of debt discount, which was recognized as interest
expense in the amount of $48,967 during the six months ended June 30, 2020. The Nov 2019 Note as of June 30, 2020 had a remaining
balance of $0.
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 six months ended June 30, 2020, the Company issued 21,118,946
shares of common stock upon the conversion of principal of $53,000, plus accrued interest of $2,650. The Dec 2019 Note was converted
based on the terms of the agreement and the Company did not recognize a gain or loss on the conversion in the financials. The Company
recorded amortization of debt discount, which was recognized as interest expense in the amount of $51,407 during the six
months ended June 30, 2020. The Dec 2019 Note as of June 30, 2020, had a remaining balance of $0.
BIOSOLAR, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
– UNAUDITED
FOR THE THREE MONTHS ENDED JUNE 30, 2020 AND
2019
|
5.
|
CONVERTIBLE
PROMISSORY NOTES (Continued)
|
The Company issued an unsecured
convertible promissory note on January 23, 2020 (the “Jan 2020 Note”), in the aggregate principal amount of $53,000.
The Company paid an original issue discount of $3,000 and received funds in the amount of $50,000. The January 23, 2020 Note matures
on January 23, 2021. The Jan 2020 Note bears interest at 10% per annum. The Jan 2020 Note may be converted into shares of the Company’s
common stock at a conversion price of sixty-one (61%) percent of the lowest average two (2) day closing bid prices during the fifteen
(15) trading days prior to the conversion date. The parties agree that if the shares of the common stock issuable upon conversion
of these Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond
the deadline that the Borrower fails to deliver such common stock. The conversion feature of the Jan 2020 Note was considered a
derivative in accordance with current accounting guidelines because of the reset conversion features of the Jan 2020 Note. The
fair value of the Jan 2020 Note has been determined by using the Binomial lattice formula from the effective date of the notes.
The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $23,025 during the
six months ended June 30, 2020. The Jan 2020 Note as of June 30, 2020 had a remaining balance of $53,000.
The Company issued an
unsecured convertible promissory note on February 13, 2020 (the “Feb 2020 Note”), in the aggregate principal
amount of $53,500. The Company paid an original issue discount of $2,000 and received funds in the amount of $51,500. The Feb
2020 Note matures on February 13, 2021. The Feb 2020 Note bears interest at 10% per annum. The Feb 2020 Note may be converted
into shares of the Company’s common stock at a conversion price of sixty-one (61%) percent of the lowest one (1) day
trading price or lowest bid price during the fifteen (15) trading days prior to the conversion date. The parties agree that
if the shares of the common stock issuable upon conversion of these Notes are not delivered by the deadline, the Borrower
shall pay to the Holder $2,000 per day in cash, for each day beyond the deadline that the Borrower fails to deliver such
common stock. The conversion feature of the Feb 2020 Note was considered a derivative in accordance with current accounting
guidelines because of the reset conversion features of the Feb 2020 Note. The fair value of the Feb 2020 Note has been
determined by using the Binomial lattice formula from the effective date of the notes. The Company recorded amortization of
debt discount, which was recognized as interest expense in the amount of $20,026 during the six months ended June 30,
2020. The Feb 2020 Note as of June 30, 2020 had a remaining balance of $53,500.
The Company issued an unsecured
convertible promissory note on March 2, 2020 (the “Mar 2020 Note”), in the aggregate principal amount of $53,000. The
Company paid an original issue discount of $3,000 and received funds in the amount of $50,000. The March 2, 2020 Note matures on
March 2, 2021. The Mar 2020 Note bears interest at 10% per annum. The Mar 2020 Note may be converted into shares of the Company’s
common stock at a conversion price of sixty-one (61%) percent of the lowest average two (2) day closing bid prices during the fifteen
(15) trading days prior to the conversion date. The parties agree that if the shares of the common stock issuable upon conversion
of these Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond
the deadline that the Borrower fails to deliver such common stock. The conversion feature of the Mar 2020 Note was considered a
derivative in accordance with current accounting guidelines because of the reset conversion features of the Mar 2020 Note. The
fair value of the Mar 2020 Note has been determined by using the Binomial lattice formula from the effective date of the notes.
The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $17,389 during the
six months ended June 30, 2020. The Mar 2020 Note as of June 30, 2020 had a remaining balance of $53,000.
The Company issued an unsecured
convertible promissory note on April 28, 2020 (the “Apr 2020 Note”), in the aggregate principal amount of $53,000.
The Company paid an original issue discount of $3,000 and received funds in the amount of $50,000. The April 28, 2020 Note matures
on April 28, 2021. The Apr 2020 Note bears interest at 10% per annum. The Apr 2020 Note may be converted into shares of the Company’s
common stock at a conversion price of sixty-one (61%) percent of the lowest average two (2) day closing bid prices during the fifteen
(15) trading days prior to the conversion date. The parties agree that if the shares of the common stock issuable upon conversion
of these Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond
the deadline that the Borrower fails to deliver such common stock. The conversion feature of the Apr 2020 Note was considered a
derivative in accordance with current accounting guidelines because of the reset conversion features of the Apr 2020 Note. The
fair value of the Apr 2020 Note has been determined by using the Binomial lattice formula from the effective date of the notes.
The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $9,148 during the
six months ended June 30, 2020. The Apr 2020 Note as of June 30, 2020 had a remaining balance of $53,000.
The Company issued an unsecured
convertible promissory note on June 22, 2020 (the Jun 2020 Note), in the aggregate principal amount of $53,000. The Company paid
an original issue discount of $3,000 and received funds in the amount of $50,000. The June 22, 2020 Note matures on June 22, 2021.
The Jun 2020 Note bears interest at 10% per annum. The Jun 2020 Note may be converted into shares of the Company’s common
stock at a conversion price of sixty-one (61%) percent of the lowest average two (2) day closing bid prices during the fifteen
(15) trading days prior to the conversion date. The parties agree that if delivery of the common stock issuable upon conversion
of these Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond
the deadline that the Borrower fails to deliver such common stock. The conversion feature of the Jun 2020 Note was considered a
derivative in accordance with current accounting guidelines because of the reset conversion features of the Jun 2020 Note. The
fair value of the Jun 2020 Note has been determined by using the Binomial lattice formula from the effective date of the notes.
The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $1,158 during the
six months ended June 30, 2020. The Jun 2020 Note as of June 30, 2020 had a remaining balance of $53,000.
BIOSOLAR, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
– UNAUDITED
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND
2019
|
6.
|
DERIVATIVE
LIABILITIES
|
We evaluated the financing
transactions in accordance with ASC Topic 815, Derivatives and Hedging, and determined that the conversion feature of the convertible
promissory note was not afforded the exemption for conventional convertible instruments due to its variable conversion rate. The
note has no explicit limit on the number of shares issuable so they did not meet the conditions set forth in current accounting
standards for equity classification. The Company elected to recognize the note under paragraph 815-15-25-4, whereby, there would
be a separation into a host contract and derivative instrument. The Company elected to initially and subsequently measure the
note in its entirety at fair value, with changes in fair value recognized in earnings. The Company recorded a derivative liability
representing the imputed interest associated with the embedded derivative. The derivative liability is adjusted periodically per
the stock price fluctuations.
The convertible
notes issued and described in Note 5 do not have fixed settlement provisions because their conversion prices are not fixed. The
conversion feature has been characterized as derivative liabilities to be re-measured at the end of every reporting period with
the change in value reported in the statement of operations.
During the six months ended
June 30, 2020, as a result of the convertible notes (“Notes”) issued that were accounted for as derivative liabilities,
we determined that the fair value of the conversion feature of the convertible notes at issuance was $265,500, 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 six months ended June
30, 2020, the Company converted $379,744 in principal of convertible notes, plus accrued interest of $32,490, and other fees of
$1,500. At June 30, 2020, the fair value of the derivative liability was $9,353,713.
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:
|
|
6/30/2020
|
|
|
|
|
|
|
Risk free interest rate
|
|
|
0.14% - 1.47%
|
|
Stock volatility factor
|
|
|
131.0% -203.0%
|
|
Weighted average expected option life
|
|
|
6 months - 5 years
|
|
Expected dividend yield
|
|
|
None
|
|
|
7.
|
COMMITMENTS
AND CONTINGENCIES
|
The Company rents office space
on a yearly basis with a monthly rent payment in the amount of $550.
In the normal course of business,
the Company may be involved in legal proceedings, claims and assessments arising. Such matters are subject to many uncertainties,
and outcomes are not predictable with assurance. In the opinion of management, the ultimate disposition of these matters will not
have a material adverse effect on the Company’s financial position or results of operations.
At June 30, 2020, there were
no legal proceedings against the Company.
BIOSOLAR, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
– UNAUDITED
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND
2019
Management has evaluated subsequent
events according to the requirements of ASC TOPIC 855 and has determined that there are the following subsequent events:
On July 2, 2020 the Company
issued 11,045,019 shares of common stock upon conversion of principal in the amount of $10,430, plus accrued interest of $5,769
according to the conditions of the convertible note dated as of May 2, 2014.
On July 6, 2020 the Company
issued 6,364,357 shares of common stock upon conversion of principal in the amount of $9,110, plus accrued interest of $2,675,
and other fees of $250 according to the conditions of the convertible note dated as of April 5, 2019.
On July 6, 2020 the Company
issued 8,000,000 shares of common stock upon conversion of principal in the amount of $14,128, plus other fees of $1,000 according
to the conditions of the convertible note dated as of August 8, 2019.
On July 13, 2020 the Company
issued 5,000,000 shares of common stock upon conversion of principal in the amount of $9,980, plus other fees of $1,000 according
to the conditions of the convertible note dated as of August 8, 2019.
On July 20, 2020 the Company
issued 8,000,000 shares of common stock upon conversion of principal in the amount of $16,568, plus other fees of $1,000 according
to the conditions of the convertible note dated as of August 8, 2019.
On July 24, 2020 the Company
issued 6,976,744 shares of common stock upon conversion of principal in the amount of $30,000 according to the conditions of the
convertible note dated as of January 23, 2019.
On July 27, 2020 the Company
issued 5,343,750 shares of common stock upon conversion of principal in the amount of $23,000 plus accrued interest of $2,650 according
to the conditions of the convertible note dated as of January 23, 2019.
On July 28, 2020 the Company
issued 11,031,846 shares of common stock upon conversion of principal in the amount of $10,370, plus accrued interest of $5,810.04
according to the conditions of the convertible note dated as of May 2, 2014.
On August 3, 2020, 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 “August 3, 2020 Note”) in the principal amount of $53,000. The August 3, 2020 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 (1) day
trading prices for common stock during the fifteen (15) trading day period prior to the conversion date.