0001019687-14-004236.txt : 20141113 0001019687-14-004236.hdr.sgml : 20141113 20141113160036 ACCESSION NUMBER: 0001019687-14-004236 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20140930 FILED AS OF DATE: 20141113 DATE AS OF CHANGE: 20141113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIASPACE Inc. CENTRAL INDEX KEY: 0001270200 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MAILING, REPRODUCTION, COMMERCIAL ART & PHOTOGRAPHY [7330] IRS NUMBER: 760742386 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-110680 FILM NUMBER: 141218333 BUSINESS ADDRESS: STREET 1: 382 N. LEMON AVE #364 CITY: WALNUT STATE: CA ZIP: 91789 BUSINESS PHONE: 626-768-3364 MAIL ADDRESS: STREET 1: 382 N. LEMON AVE #364 CITY: WALNUT STATE: CA ZIP: 91789 FORMER COMPANY: FORMER CONFORMED NAME: Viaspace Inc. DATE OF NAME CHANGE: 20050705 FORMER COMPANY: FORMER CONFORMED NAME: GLOBAL WIDE PUBLICATION LTD DATE OF NAME CHANGE: 20031113 10-Q 1 viaspace_10q-093014.htm QUARTERLY REPORT

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

  

x Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
   
  For the quarterly period ended September 30, 2014

 

or

 

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
   
  For the transition period from  __________ to ___________

 

Commission File Number 333-110680

 

VIASPACE INC.

(Exact name of small business issuer as specified in its charter)

   

Nevada 76-0742386
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   

382 N. Lemon Ave., Suite 364, Walnut, CA 91789

(Address of principal executive offices)

 

(626) 768-3360

(Issuer’s telephone number)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed 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 x  NO o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 x  NO o

 

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

 

Large accelerated filer o Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o  NO x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 1,557,987,163 shares of $0.001 par value common stock issued and outstanding as of November 13, 2014.

 

 
 

 

VIASPACE INC.

 

INDEX

FISCAL QUARTER ENDED SEPTEMBER 30, 2014

 

    Page
Part I. Financial Information  
     
Item 1. Financial Statements  
  Balance Sheets as of September 30, 2014 (Unaudited) and December 31, 2013 3
  Statements of Operations For the Three and Nine Months Ended September 30, 2014 and 2013 (Unaudited) 4
  Statements of Cash Flows For the Nine Months Ended September 30, 2014 and 2013 (Unaudited) 5
  Notes to Financial Statements September 30, 2014 (Unaudited) and December 31, 2013 6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
Item 4. Controls and Procedures 15
     
Part II. Other Information  
     
Item 1. Legal Proceedings 16
Item 1A. Risk Factors 16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Mine Safety Disclosures 17
Item 5. Other Information 17
Item 6. Exhibits 18
     
Signatures 19

 

2
 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

VIASPACE INC.

BALANCE SHEETS

  

   September 30, 2014   December 31, 2013 
   (Unaudited)   * 
ASSETS          
CURRENT ASSETS:          
Cash and equivalents  $21,000   $6,000 
Prepaid expenses   277,000    233,000 
Other current assets   5,000     
TOTAL CURRENT ASSETS   303,000    239,000 
           
FIXED ASSETS, NET   1,000    1,000 
           
OTHER ASSETS:          
Other assets   1,000    1,000 
TOTAL OTHER ASSETS   1,000    1,000 
           
TOTAL ASSETS  $305,000   $241,000 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
CURRENT LIABILITIES:          
Accounts payable  $56,000   $32,000 
Accrued expenses   91,000    60,000 
Unearned revenue   73,000    37,000 
Related party payables   640,000    680,000 
TOTAL CURRENT LIABILITIES   860,000    809,000 
           
COMMITMENTS AND CONTINGENCIES (Note 8)          
           
STOCKHOLDERS’ DEFICIT:          
Preferred stock, $0.001 par value, 10,000,000 shares authorized, one share of Series A preferred stock issued and outstanding in 2014 and 2013        
Common stock, $0.001 par value, 1,800,000,000 shares authorized, 1,532,197,689 and 1,489,332,999 shares issued and outstanding in 2014 and 2013, respectively   1,532,000    1,489,000 
Additional paid in capital   47,875,000    47,432,000 
Accumulated deficit   (49,962,000)   (49,489,000)
Total stockholders’ deficit   (555,000)   (568,000)
           
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $305,000   $241,000 

 

* Amounts derived from audited financial statements for the year ended December 31, 2013

  

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

 

3
 

 

VIASPACE INC.

STATEMENTS OF OPERATIONS

(Unaudited)

 

   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2014   2013   2014   2013 
REVENUES  $55,000   $9,000   $125,000   $72,000 
COST OF REVENUES   8,000    7,000    28,000    22,000 
GROSS PROFIT   47,000    2,000    97,000    50,000 
                     
OPERATING EXPENSES                    
Operations   12,000    7,000    43,000    24,000 
Selling, general and administrative   135,000    171,000    486,000    487,000 
Total operating expenses   147,000    178,000    529,000    511,000 
LOSS FROM OPERATIONS   (100,000)   (176,000)   (432,000)   (461,000)
                     
OTHER INCOME (EXPENSE)                    
Interest expense   (21,000)   (21,000)   (46,000)   (61,000)
Other income   5,000        5,000     
Total other expense   (16,000)   (21,000)   (41,000)   (61,000)
                     
LOSS BEFORE INCOME TAXES   (116,000)   (197,000)   (473,000)   (522,000)
INCOME TAXES                
                     
NET LOSS  $(116,000)  $(197,000)  $(473,000)  $(522,000)
                     
LOSS PER SHARE OF COMMON STOCK – Basic and diluted  $*   $*   $*   $* 
                     
WEIGHTED AVERAGE SHARES OUTSTANDING – Basic and diluted   1,521,372,286    1,474,163,688    1,509,793,310    1,459,097,682 

  

*   Less than $0.01 per common share.

 

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

 

4
 

 

VIASPACE INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Nine Months Ended 
   September 30, 
   2014   2013 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(473,000)  $(522,000)
Adjustments to reconcile net loss to net cash used in operating activities:          
Stock option compensation   35,000    9,000 
Stock issued for consulting expense   218,000    287,000 
Amortization of debt discount   46,000    61,000 
(Increase) decrease in:          
Prepaid expenses   42,000    36,000 
Increase (decrease) in:          
Accounts payable   23,000    (38,000)
Accrued expenses and other       (28,000)
Unearned revenue   36,000    (16,000)
Related party   (40,000)    
Net cash used in operating activities   (113,000)   (211,000)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Payments on financed insurance       (1,000)
Net cash used in financing activities       (1,000)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Loans from related party   183,000    190,000 
Payments on financed insurance   (55,000)   (7,000)
Net cash provided by financing activities   128,000    183,000 
           
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   15,000    (29,000)
CASH AND CASH EQUIVALENTS, Beginning of period   6,000    50,000 
CASH AND CASH EQUIVALENTS, End of period  $21,000   $21,000 
           
Supplemental Disclosure of Cash Flow Information:          
Cash paid during the period for:          
Interest  $   $ 
Income taxes  $   $ 

 

Supplemental Disclosure of Non-Cash Activities for 2013:

  o The Company issued 34,000,000 shares of the Company’s common stock for future services valued at $417,800. This amount was recorded at issuance as prepaid expenses.
  o The Company recorded a discount on the loans from Dr. Schewe of $61,000 as a result of a beneficial conversion feature. During 2013, Dr Schewe converted loans of $190,000 to equity.
  o The Company issued 3,125,000 shares of the Company’s common stock as payment of $35,000 in accounts payable.
  o The Company cancelled 1,672,241 shares of the Company’s common stock valued at $50,000 that were issued to a vendor who later returned the shares when services were not performed.
  o The Company financed its annual director and officer insurance premium in the amount of $68,223.

 

Supplemental Disclosure of Non-Cash Activities for 2014:

  o The Company issued 20,000,000 shares of the Company’s common stock for future services valued at $219,000. This amount was recorded at issuance as prepaid expenses.
  o The Company recorded a discount on the loans from Dr. Schewe of $46,000 as a result of a beneficial conversion feature. During 2014, Dr. Schewe converted loans of $183,000 to equity.
  o The Company financed its annual director and officer insurance premium in the amount of $86,416.

 

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

 

5
 

 

VIASPACE INC.

NOTES TO FINANCIAL STATEMENTS

September 30, 2014 (Unaudited) and December 31, 2013 (Audited)

 

Note 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Description of Business – VIASPACE Inc. (“we”, “us”, “VIASPACE”, or the “Company”) was founded in July 1998. Its business involves renewable energy and is based on biomass, in particular our license to a dedicated energy crop with the trademark “Giant King® Grass” (“GKG”). Through a sublicense for GKG we obtained from VIASPACE Green Energy Inc. (“VGE”), we are able to commercialize GKG throughout the world, except for the People’s Republic of China (“China”) and the Republic of China (“Taiwan”).

 

GKG can be burned in 100% biomass power plants to generate electricity; made into pellets that can be burned together with coal to reduce carbon emissions from existing power plants; generate bio methane through anaerobic digestion, and can be used as a feedstock for low carbon liquid biofuels for transportation, biochemicals and bio plastics. Cellulosic ethanol, bio butanol and other liquid cellulosic biofuels, do not use corn or other food sources as feedstock. GKG can also be used as animal feed. GKG and other plants absorb and store carbon dioxide from the atmosphere as they grow. When they are burned, they release the carbon dioxide back into the atmosphere, but it is the same carbon dioxide that was removed from the atmosphere, and so this process is carbon neutral. Small amounts of fossil fuel are used by the farm equipment, transportation of GKG and fertilizer, so that the overall process of growing and burning GKG probably has some net carbon dioxide emissions, but much lower emissions than burning coal or other fossil fuels directly to create the same amount of energy. GKG has been independently tested by customers and been shown to have excellent energy content, high bio methane production, and the cellulosic sugar content needed for biofuels and biochemicals.

 

Going Concern – The Company has incurred significant losses from operations, resulting in an accumulated deficit of $49,962,000. The Company expects such losses to continue. However, on September 30, 2012, as discussed in Note 4, the Company entered into a Loan Agreement with Dr. Kevin Schewe, a member of the Company’s Board of Directors, whereby Dr. Schewe agreed to fund the Company up to $1,000,000 over a five year period in accordance with such agreement. The Company expects loans from Dr. Schewe and revenue generated from future contracts using the sublicense it has for Giant King Grass to fund operations for the foreseeable future. However no assurance can be given that Dr. Schewe will continue to fund the Company or that contracts will be obtained in the future, or if they are obtained, that they will be profitable. Accordingly, there continues to be substantial doubt as to the Company’s ability to continue as a going concern. The financial statements do not include any other adjustments that might result from the outcome of these uncertainties. 

 

Basis of Presentation - The accompanying unaudited financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Results for interim periods should not be considered indicative of results for a full year. These interim financial statements should be read in conjunction with the financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. The accounting policies used in preparing these financial statements are the same as those described in Note 1 to the financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included.

 

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results and outcomes may materially differ from management’s estimates and assumptions.

 

Reclassifications of prior year’s data have been made to conform to 2014 classifications. Such classifications had no effect on net loss reported in the statements of operations.

 

Recently Issued Accounting Pronouncements – In May 2014, the FASB issued new guidance on the recognition of revenue. The guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Our adoption begins with the first fiscal quarter of fiscal year 2017. Early adoption is not permitted. We are currently evaluating the impact of the adoption of this accounting standard update on our results of operations or financial position.

 

6
 

 

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern (ASU 2014-15).  The guidance in ASU 2014-15 sets forth management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that, when preparing financial statements for interim and annual financial statements, management should evaluate whether conditions or events, in the aggregate, raise substantial doubt about the entity's ability to continue as a going concern for one year from the date the financial statements are issued or are available to be issued. This evaluation should include consideration of conditions and events that are either known or are reasonably knowable at the date the financial statements are issued or are available to be issued, as well as whether it is probable that management's plans to address the substantial doubt will be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods and annual periods thereafter. Early application is permitted.  The adoption of this guidance is not expected to have a material impact on the Company’s financial statements.

 

Subsequent Events - We have evaluated events and transactions subsequent to the balance sheet date. Based on this evaluation, we are not aware of any events or transactions (other than those disclosed in Note 9) that occurred subsequent to the balance sheet date but prior to filing that would require recognition or disclosure in our financial statements.

 

NOTE 2 – PREPAID EXPENSES

 

The Company has entered into agreements with certain of its consultants and vendors whereby the Company issued registered shares of its common stock under an existing registration statement on Form S-8 as well as unregistered shares of common stock in exchange for future services to be provided to the Company. At September 30, 2014 and December 31, 2013, the total remaining value of these agreements was $186,000 and $182,000, respectively, which is included in prepaid expenses in the accompanying balance sheets. The Company has engaged a third party provider to pay certain expenses of the Company on behalf of the Company. As compensation for the payment of these expenses on behalf of the Company, the Company pays the provider in shares of common stock equivalent to the expense paid plus a fee equal to 15% of the expense paid. In 2014, the Company issued 20,000,000 unregistered shares of the Company’s common stock with a value of $219,000 in advance of the payments made by the provider. As of September 30, 2014 and December 31, 2013, included in prepaid expenses for this third party provider is $186,000 and $114,000, respectively, for shares of stock issued to the provider in excess of amounts paid on the Company’s behalf. Other prepaid expenses (stock related) were zero and $68,000 as of September 30, 2014 and December 31, 2013, respectively. For the three months ended September 30, 2014 and 2013, the Company recorded $64,000 and $115,000, respectively, of stock related expenses. For the nine months ended September 30, 2014 and 2013, the Company recorded $218,000 and $287,000, respectively, of stock related expenses.

 

Other prepaid expenses (non stock related) were $91,000 and $51,000 at September 30, 2014 and December 31, 2013, respectively.

 

NOTE 3 – STOCK OPTIONS, WARRANTS AND ISSUED STOCK

 

The fair value of each stock option granted is estimated on the date of the grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model has assumptions for risk free interest rates, dividends, stock volatility and expected life of an option grant. The risk free interest rate is based upon market yields for United States Treasury debt securities at a maturity near the term remaining on the option. Dividend rates are based on the Company’s dividend history.  The stock volatility factor is based on the historical volatility of the Company’s stock price. The expected life of an option grant is based on management’s estimate as no options have been exercised in the Plan to date. The Company calculated a forfeiture rate for employees and directors based on historical information. A forfeiture rate of 0% is used for options granted to consultants. The fair value of each option grant to employees, directors and consultants is calculated by the Black-Scholes method and is recognized as compensation expense on a straight-line basis over the vesting period of each stock option award. There have been no stock options issued in 2014. For stock options issued to employees, directors, consultants and advisory board members in 2013, the fair value was estimated at the date of grant using the following range of assumptions: 

 

    2013  
Risk free interest rate     2.00% - 2.06%  
Dividends     0%  
Volatility factor     134.81% 138.17%  
Expected life     6.67 years  
Annual forfeiture rate     0%  

 

7
 

 

The following table summarizes activity for employees and directors in the Company’s Plan at September 30, 2014:

 

    Number of
Shares
    Weighted-
Average
Exercise
Price Per
Share
    Weighted-
Average
Remaining
Contractual
Term In Years
    Aggregate
Intrinsic
Value
 
Outstanding at December 31, 2013     73,408,000     $ 0.0132                  
Granted                            
Exercised                            
Forfeited                            
Outstanding at September 30, 2014     73,408,000     $ 0.0132       6.14     $ 97,000  
Exercisable at September 30, 2014     69,658,000     $ 0.0132       5.99     $ 97,000  

 

There were no stock options granted in 2014. The Plan recorded $35,000 of compensation expense for employees and director stock options in 2014.  At September 30, 2014, there was $43,000 of unrecognized compensation costs related to non-vested share-based compensation arrangements under the Plan that is expected to be recognized over a weighted average period of approximately one year. At September 30, 2014, the fair value of options vested for employees and directors was $578,000.  There were no options exercised during 2014.

 

During 2014, the Company issued 273,846 unregistered shares of common stock to a consultant for services provided to the Company. These share issuances were recorded at $2,880 which is the fair market value determined by the price of the Company’s common stock trading on the OTC Markets on the date of grant.

 

NOTE 4 – SHORT-TERM AND LONG-TERM DEBT

 

Loan Agreement with Dr. Kevin Schewe

 

Effective September 30, 2012, the Company entered into a Loan Agreement with Director Kevin Schewe whereby Dr. Schewe agreed to loan up to $1 million to the Company over a five-year period based on requests from the Company. The loans would be evidenced by a Secured Convertible Note. Each individual loan will accrue interest at 6% per annum and are secured by all assets of the Company. Each note would mature on the second anniversary of the issuance date of such note. Each note is convertible at Dr. Schewe’s request, into a fixed number of shares of the Company’s common stock based on the closing price of the Company’s common stock for the twenty trading days prior to the issuance of the loan, less a 20% discount. In connection with the separation from VGE as discussed in Note 1, Chang granted Dr. Schewe an irrevocable proxy that permits him to vote the Preferred Share, giving him the majority shareholder vote. As the controlling shareholder of the Company he has the ability to increase the number of authorized shares without additional shareholder approval. As such, if the outstanding balance on the loan was convertible into more shares than the Company has authorized, he has the ability to increase the authorized shares. As a result, the conversion feature is not deemed to be a derivative instrument subject to bifurcation.

 

From January 1, 2014 through September 30, 2014, Dr. Schewe made loans of $183,000 to the Company. The Company recorded a discount on the loans of $46,000 as a result of a beneficial conversion feature, which will be amortized over the term of the note on a straight-line basis, which approximates the effective interest method. During 2014, Dr. Schewe converted loans totaling $183,000 into 22,590,844 common shares of the Company. At the time of the conversions, the company recorded the discount as additional interest expense. As of September 30, 2014, the Company had remaining availability under the note of $475,000. 

 

On October 28, 2014, the Board of Directors of the Company voted to change the Conversion Price in the Agreement from 80% of the Average Trading Price as reported by the principal trading exchange on which the Company’s Common Stock is traded for the twenty (20) trading days preceding the date of the Note to 50% of the Average Trading Price as reported by the principal trading exchange on which the Company’s Common Stock is traded for the twenty (20) trading days preceding the date of the Note.

 

NOTE 5 – STOCKHOLDERS’ EQUITY

 

During 2014, the Company issued 20,273,846 unregistered shares of common stock to employees, consultants and vendors for services provided or to be provided to the Company. These share issuances were recorded at $222,000 which is the fair market value determined by the price of the Company’s common stock trading on the OTC Markets on the date of grant. As of September 30, 2014, there were 1,532,197,689 shares of common stock outstanding.

 

The Company issued 22,590,844 shares of common stock to Director Kevin Schewe as he converted loans into shares of common stock as allowed under an agreement he has with the Company as discussed in Note 4.

 

8
 

  

NOTE 6 – NET LOSS PER SHARE

 

The Company computes net loss per share in accordance with FASB ASC Topic 260.  Under its provisions, basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the periods presented.  Diluted earnings would customarily include, if dilutive, potential shares of common stock issuable upon the exercise of stock options and warrants.  The dilutive effect of outstanding stock options and warrants is reflected in earnings per share in accordance with FASB ASC Topic 260 by application of the treasury stock method.  For the periods presented, the computation of diluted loss per share equaled basic loss per share as the inclusion of any dilutive instruments would have had an antidilutive effect on the earnings per share calculation in the periods presented.

 

The following table sets forth common stock equivalents (potential common stock) at September 30, 2014 and 2013 that are not included in the loss per share calculation since their effect would be anti-dilutive for the periods indicated:

  

   2014   2013 
Stock Options   73,408,000    68,408,000 

 

The following table sets forth the computation of basic and diluted net loss per share for the three months ended September 30, 2014 and 2013, respectively:

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2014     2013     2014     2013  
Basic and diluted net loss per share:                                
                                 
Numerator:                                
Net loss attributable to common stock   $ (116,000 )   $ (197,000 )   $ (473,000 )   $ (522,000 )
Denominator:                                
Weighted average shares of common stock outstanding     1,521,372,286       1,474,163,688       1,509,793,310       1,459,097,682  
Net loss per share of common stock, basic and diluted   $ *     *     *     *  

 

*  Less than $0.01

 

NOTE 7 – RELATED PARTY TRANSACTIONS

 

Included in the Company’s balance sheets at September 30, 2014 and December 31, 2013 are Related Party Payables. The Company has a payable of $640,000 at September 30, 2014 and $680,000 at December 31, 2013. Included in the amount at September 30, 2014 and December 31, 2013 is $640,000 owed to Dr. Kukkonen, CEO of the Company. Of the amount to Dr. Kukkonen, there is a cash component totaling $136,000 and a common stock component totaling $504,000. Dr. Kukkonen deferred a portion of his 2009, 2010 and 2011 stock awards and is entitled to the following unregistered shares of Company common stock at September 30, 2014: 11,195,707 shares for deferred 2009 compensation; 8,467,939 shares for deferred 2010 compensation; and 24,730,678 shares for deferred 2011 compensation.

 

Additionally, the Company agreed to pay VGE $40,000 by September 30, 2014 as reimbursement for legal fees and costs in connection with the separation of the Company and VGE. This amount was paid on September 25, 2014.

 

The Company has a loan agreement with Director Dr. Kevin Schewe which is described in Note 4.

 

On December 18, 2013, the Company entered into a Representation in Pakistan and Giant King Grass Supply contract with Winergy Pakistan Private Limited (“Winergy”), a company incorporated and existing under the laws of Pakistan. Mr. Khurram Irshad, a director of the Company, is a director and shareholder of Winergy. Winergy was also appointed the exclusive representative of the Company in Pakistan. Winergy is developing bioenergy and animal feed projects in Pakistan and seeking a biomass source. The Company's Giant King Grass will be supplied to Winergy and a propagation nursery and test plot is to be established in Pakistan. Winergy will operate and pay the expenses for a Giant King Grass propagation nursery and test plot in Pakistan. Winergy paid a one-time fee of $5,000 to the Company upon the signing of the contract. The Company expects to receive additional license fees in the future from Winergy when they are able to secure relationships with customers who will use the Company's Giant King Grass in their particular application. No additional revenues were received in 2014.

 

9
 

 

NOTE 8 – OTHER COMMITMENTS AND CONTINGENCIES

 

Leases

 

The Company currently has no long term office lease. The Company leases land in San Diego County, California where it grows Giant King Grass. Rent expense charged to operations for the three and nine months ended September 30, 2014 was $6,000 and $12,000, respectively. Rent expense charged to operations for three and nine months ended September 30, 2013 was $4,000 and $8,000, respectively.

 

Collaborative Agreements

 

We are a party to certain collaborative agreements with various entities for the joint operation of test plots to establish that GKG grows well in the area and optimal agronomic practices are developed. These agreements are in the form of development collaborations and licensing agreements. Under these agreements, we have granted rights to grow and use of GKG. In return, we are entitled to receive certain payments for the operations of the test plots and license fees on the harvesting of GKG should it ultimately be commercialized.

 

All of our collaborative agreements are subject to termination by either party, without significant financial penalty. Under the terms of these agreements, upon a termination we are entitled to reacquire all rights in our technology at no cost and are free to re-license the technology to other collaborative partners.

 

Revenue earned from collaborative agreements is comprised of negotiated payments for the establishment and operations of the test plots. Deferred revenue represents customer payments received which are related to future performance. Generally for collaborative agreements establishing test plots, the Company recognizes revenue only after the Giant King Grass is planted in the customer’s location. Until that time any money received is recorded as deferred revenue. Once the planting is complete, the collaborative agreement payments are amortized over a period of six and one-half months which represents the growing season of Giant King Grass. During the three and nine months ended September 30, 2014, the Company received $59,000 and $162,000, respectively, in payments under these collaborative agreements. During the three and nine months ended September 30, 2013, the Company received $25,000 and $51,000, respectively, in payments under these collaborative agreements. The payments were deferred until the planting of the seedlings and then recorded as revenue through the date of the first harvest. The Company recognized revenue from these collaborative agreements of $55,000 and $9,000 for the three months ended September 30, 2014 and 2013, respectively. The Company recognized revenue from these collaborative agreements of $125,000 and $72,000 for the nine months ended September 30, 2014 and 2013, respectively.

 

License Agreement

 

Effective as of September 30, 2012, VIASPACE and VGE entered into a Supply, License and Commercialization Agreement (“License Agreement”) pursuant to which VGE granted to VIASPACE a nontransferable, royalty-bearing exclusive license to commercialize Giant King Grass anywhere within the world other than China and Taiwan. Additionally, the License Agreement allows VIASPACE to use the Giant King Grass intellectual property and VIASPACE Green Energy trade name in connection with its efforts to commercialize Giant King Grass. The Company assigned no value to the sublicense due to uncertainties of future revenues.

 

VIASPACE agreed that it would not during the term of the License Agreement and a three-year period thereafter, (i) manufacture, commercialize or otherwise engage in any research or development of a grass or any other product or material having similar or otherwise competitive properties to Giant King Grass.

 

VGE agreed to provide VIASPACE with Giant King Grass seedlings that will be filled at an agreed upon price as set forth in the License Agreement. VIASPACE agreed to pay VGE for and during the Term a royalty of eight percent (8%) on net sales made in its territory.

 

The initial term of the License Agreement is for two years (“Initial Term”). As a condition to the right to renew after the first two-year term for an additional two year term, VIASPACE needed to achieve the milestones in the first two year period:

 

  o One or more fully-executed, third party sales contracts for the sale of Giant King Grass shall have been entered into during the Initial Term, pursuant to which VIASPACE is to be paid an aggregate amount of at least $200,000 within that 24 consecutive monthly period; and two or more, third party growing locations of at least 10 hectares in total shall have been obtained and planted during the Initial Term. The Company has entered into various collaborative agreements with entities for the joint operation of test plots to satisfy these milestones.

 

These milestones were achieved by the Company as of September 30, 2014 and the license was renewed for another two years.

 

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As a condition to the right to renew the First Renewal Term (for years five and six) of the License Agreement, the Company is to achieve during the First Renewal Term the following milestones by September 30, 2016 as a condition to any such renewal:

 

• A total of least three or more (including the above) fully-executed, third party sales contracts for the sale of Giant King Grass shall have been entered into during the First Renewal Term, pursuant to which the Registrant is to be paid the aggregate amount of $400,000, with not less than $100,000 of the Initial Sales Milestone having been paid during the First Renewal Term and with the remaining unpaid balance of the Initial Sales Milestone being paid within six months of the Second Renewal Term (e.g., in the fifth year) and the Second Sales Milestone being paid in full within that 24 consecutive monthly period following the signing of any such third contract; and

 

• A total of at least three or more (including the two above) growing locations of at least 30 hectares in total shall have been obtained and planted during the Second Renewal Term, which shall be subject to the reasonable satisfaction of VGE.

 

Employment Agreements

 

Effective October 1, 2013, the Company entered into one-year employment agreements with Carl Kukkonen and Stephen Muzi. Dr. Kukkonen serves as Chief Executive Officer of the Company and Mr. Muzi serves as Chief Financial Officer, Treasurer and Secretary. Dr. Kukkonen will receive a salary of $164,800 per annum and Mr. Muzi would receive $61,800 per annum. Each of them would also be entitled to a bonus as determined by the Company’s Board of Directors, customary insurance and health benefits, and reimbursement for out-of-pocket expenses in the course of his employment. Additionally, Dr. Kukkonen is to receive 20 business days paid leave per year and Mr. Muzi is to receive 10 business days paid leave.

 

Litigation

 

The Company is not party to any material legal proceedings at the present time.

 

NOTE 9 – SUBSEQUENT EVENTS

 

On October 23, 2014, the Company issued 10,000,000 unregistered shares of common stock to a consultant for prepaid services to be provided to the Company. These share issuances were recorded at $71,000 which is the fair market value determined by the price of the Company’s common stock trading on the OTC Markets on the date of grant.

 

On October 29, 2014, Kevin Schewe, advanced an additional $22,000 pursuant to the convertible loan agreement and immediately converted the $22,000 loan into 5,789,474 shares of Company common stock at a conversion price of $0.0038 per common share.

 

The Company entered into one-year employment agreements with Carl Kukkonen and Stephen Muzi on October 28, 2014 that are effective for the period from October 1, 2014 through September 30, 2015. Dr. Kukkonen serves as Chief Executive Officer of the Company and Mr. Muzi serves as Chief Financial Officer, Treasurer and Secretary. Dr. Kukkonen will receive a salary of $169,744 per annum and Mr. Muzi will receive $63,654 per annum.

 

On October 28, 2014, two million non-qualified stock options were issued to Director Angelina Galiteva, two million non-qualified stock options were issued to Director Khurram Irshad and eight million non-qualified stock options were issued to Director Kevin Schewe. Additionally, on October 28, 2014, eight million incentive stock options were issued to Carl Kukkonen and four million incentive stock options were issued to Stephen Muzi. All of the stock options will be granted at fair market value with a 2-year vesting period on a quarterly basis.

 

The Company entered into a Senior Secured Convertible Promissory Note (the "Agreement") with Kevin Schewe, Director, on September 28, 2012. On October 28, 2014, the Board of Directors of the Company voted to change the Conversion Price in the Agreement from 80% of the Average Trading Price as reported by the principal trading exchange on which the Company’s Common Stock is traded for the twenty (20) trading days preceding the date of the Note to 50% of the Average Trading Price as reported by the principal trading exchange on which the Company’s Common Stock is traded for the twenty (20) trading days preceding the date of the Note.

 

On October 28, 2014, the Board of Directors of the Registrant ratified and approved that the number of reserved shares of common stock under the 2005 Stock Incentive Plan be equal to 30% of the total number of shares of common stock issued and outstanding as of the close of business on the immediately preceding December 31, which is the last day of the Company’s fiscal year.

 

On November 6, 2014, Kevin Schewe, advanced an additional $40,000 pursuant to the convertible loan agreement and immediately converted the $40,000 loan into 10,000,000 shares of Company common stock at a conversion price of $0.004 per common share. Following this issuance, the Company had remaining availability under the note of $413,000.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

The following discussion contains certain statements that constitute “forward-looking statements”.  Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition or Plan of Operation.”  These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control.  Our future results may differ materially from those currently anticipated depending on a variety of factors, including those described below under “Risks Related to Our Future Operations” and our filings with the Securities and Exchange Commission.  The following should be read in conjunction with the unaudited Financial Statements and notes thereto that appear elsewhere in this Report and in conjunction with our 2013 Annual Report on Form 10-K as filed with the SEC.

 

VIASPACE Overview

 

VIASPACE Inc. (“we”, “us”, “VIASPACE”, or the “Company”) was founded in July 1998. Its business involves renewable energy and is based on biomass, in particular our license to a dedicated energy crop with the trademark “Giant King® Grass” (“GKG”). Through a sublicense for GKG we obtained from VIASPACE Green Energy Inc. (“VGE”), we are able to commercialize GKG throughout the world, except for the People’s Republic of China (“China”) and the Republic of China (“Taiwan”).

 

GKG can be burned in 100% biomass power plants to generate electricity; made into pellets that can be burned together with coal to reduce carbon emissions from existing power plants; generate bio methane through anaerobic digestion, and can be used as a feedstock for low carbon liquid biofuels for transportation, biochemicals and bio plastics. Cellulosic ethanol, bio butanol and other liquid cellulosic biofuels, do not use corn or other food sources as feedstock. GKG can also be used as animal feed. GKG and other plants absorb and store carbon dioxide from the atmosphere as they grow. When they are burned, they release the carbon dioxide back into the atmosphere, but it is the same carbon dioxide that was removed from the atmosphere, and so this process is carbon neutral. Small amounts of fossil fuel are used by the farm equipment, transportation of GKG and fertilizer, so that the overall process of growing and burning GKG probably has some net carbon dioxide emissions, but much lower emissions than burning coal or other fossil fuels directly to create the same amount of energy. GKG has been independently tested by customers and been shown to have excellent energy content, high bio methane production, and the cellulosic sugar content needed for biofuels and biochemicals.

 

Critical accounting policies and estimates

 

Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” (“FRR60”) issued by the SEC, suggests companies provide additional disclosure and commentary on those accounting policies considered most critical.  FRR 60 considers an accounting policy critical if it is important to the Company’s financial condition and results of operations, and requires significant judgment and estimates on the part of management in its application.  For a summary of the Company’s significant accounting policies, including the critical accounting policies discussed below, see the accompanying notes to the financial statements.

 

The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States of America  requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period.  On an ongoing basis, the Company evaluates its estimates, which are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.  The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of expenses that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions.  The following accounting policies discussed below require significant management judgments and estimates.

 

Revenue Recognition - The Company has two revenue models for GKG: 1. grass plantation integrated with a power plant or processing facility such as a pellet mill under company or joint venture control, and 2. contract plantation establishment, support and licensing for a customer that owns and operates the plantation and power plant.

 

For the three and nine months ended September 30, 2014 and 2013, revenue includes amounts earned through consulting agreements and collaborative agreements for the joint operation of test plots to establish that GKG grows well in the area and optimal agronomic practices are developed. Revenue earned from collaborative agreements is comprised of negotiated payments for the operations of the test plots. Deferred revenue represents payments received which are related to future performance.

 

With regard to revenue recognition in connection with agreements that include multiple deliverables, management reviews the relevant terms of the agreements and determines whether such deliverables should be accounted for as a single unit of accounting in accordance with FASB ASC 605-25, Multiple-Element Arrangements. If it is determined that the items do not have stand-alone value, then such deliverables are accounted for as a single unit of accounting and any payments received pursuant to such agreement, including any upfront or development milestone payments and any payments received for support services, will be deferred and included in deferred revenue within our balance sheet until such time as management can estimate when all of such deliverables will be delivered, if ever. Management reviews and reevaluates such conclusions as each item in the arrangement is delivered and circumstances of the development arrangement change.

 

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The Company accounts for equity instruments issued to consultants and vendors in exchange for goods and services in accordance with the provisions of FASB ASC Topic 505-50, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods or Services” and “Accounting Recognition for Certain Transactions Involving Equity Instruments Granted to Other than Employees”. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement. In accordance with FASB ASC Topic 505-50, an asset acquired in exchange for the issuance of fully vested, non-forfeitable equity instruments should not be presented or classified as an offset to equity on the grantor's balance sheet once the equity instrument is granted for accounting purposes. Accordingly, the Company records the fair value of the fully vested, non-forfeitable common stock issued for future consulting services as prepaid expenses in its balance sheet.

 

The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There is no assurance that actual results will not differ from these estimates.

 

Results of Operations

 

Three Months Ended September 30, 2014 Compared to September 30, 2013

 

Revenues

 

Revenues were $55,000 and $9,000 for the three months ended September 30, 2014 and 2013, respectively, an increase of $46,000. The revenues relate to collaborative agreements for the joint operation of test plots to establish whether Giant King Grass grows well in customer’s countries and optimal agronomic practices are developed.

 

Cost of Revenues

 

Costs of revenues were $8,000 and $7,000 for the three months ended September 30, 2014 and 2013, respectively, an increase of $1,000. The costs incurred by the Company to support the collaborative agreements include travel costs and external consulting costs. The Company will send personnel or consultants to oversee the initial plantings of Giant King Grass in the customer’s locations.

 

Gross Profit

 

The resulting effect on these changes in revenues and cost of revenues for the three months ended September 30, 2014 compared to the same period in 2013 was an increase in gross profit from a gross profit of $2,000 for the three months ended September 30, 2013 to gross profit of $47,000 for the three months ended September 30, 2014.

 

Operations Expenses

 

Operations expenses were $12,000 and $7,000 for the three months ended September 30, 2014 and 2013, respectively, an increase of $5,000. Utilities were higher by $2,000 in 2014 as compared with 2013 due to higher water costs for the Company’s Giant King Grass test plot in San Diego County. Other operations expenses increased $3,000 during 2014 as compared with 2013. Operations expenses consist of plantation expenses related to the Company’s test plot in California and costs associated with agronomy support and travel for potential customers.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses were $135,000 and $171,000 for the three months ended September 30, 2014 and 2013, respectively, a decrease of $36,000. Stock option compensation expense increased $7,000 in 2014 as compared with 2013 due to new stock option grants in 2013 that were amortized in 2014 with no corresponding amortization required in 2013. Accounting fees decreased $3,000 in 2014 as compared with 2013 due to reduced annual audit costs in 2014 as compared with 2013. Consulting fees decreased $2,000 in 2014 as the Company used fewer consultants in 2014 as compared with 2013. Public relations expenses decreased $34,000 in 2014 as the Company incurred reduced investor relations expenses. Insurance expenses related to the Company’s director and officers’ liability insurance policy increased $4,000 in 2014 as compared with the same period in 2013 due to a higher premium. Travel decreased $7,000 in 2014 as compared with the same period of 2013, due to less travel associated with conferences and new business travel costs. Other selling, general and administrative expenses, net, decreased $1,000 for the three months ended September 30, 2014 compared with the same period in 2013.

 

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Loss from Operations

 

The resulting effect on these changes in gross profits, operations expenses, and selling, general and administrative expenses was a decrease in loss from operations in 2014. For the three months ended September 30, 2014, the Company had a loss from operations of $100,000 compared with a loss from operations of $176,000 for the three months ended September 30, 2013, a decrease of $76,000.

 

Nine Months Ended September 30, 2014 Compared to September 30, 2013

 

Revenues

 

Revenues were $125,000 and $72,000 for the nine months ended September 30, 2014 and 2013, respectively, an increase of $53,000. The revenues relate to collaborative agreements for the joint operation of test plots to establish that Giant King Grass grows well in customer’s countries and optimal agronomic practices are developed.

 

Cost of Revenues

 

Costs of revenues were $28,000 and $22,000 for the nine months ended September 30, 2014 and 2013, respectively, an increase of $6,000. The costs incurred by the Company to support the collaborative agreements include travel costs and external consulting costs. The Company will send personnel or consultants to oversee the initial plantings of Giant King Grass in the customer’s locations.

 

Gross Profit

 

The resulting effect on these changes in revenues and cost of revenues for the nine months ended September 30, 2014 compared to the same period in 2013 was an increase in gross profit from a gross profit of $50,000 for the nine months ended September 30, 2013 to gross profit of $97,000 for the nine months ended September 30, 2014.

 

Operations Expenses

 

Operations expenses were $43,000 and $24,000 for the nine months ended September 30, 2014 and 2013, respectively, an increase of $19,000. During the nine months ended September 30, 2014, the Company incurred approximately $10,000 of operating expenses related to assisting the University of California in establishing a research collaboration growing Giant King Grass in Holtville, California. Utilities were higher by $4,000 in 2014 as compared with 2013 due to higher water costs for the Company’s Giant King Grass test plot in San Diego County. Other operations expenses increased $5,000 during 2014 as compared with 2013. Operations expenses consist of plantation expenses related to the Company’s test plot in California and costs associated with agronomy support and travel for potential customers. 

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses were $486,000 and $487,000 for the nine months ended September 30, 2014 and 2013, respectively, a decrease of $1,000. Stock option compensation expense increased $26,000 in 2014 as compared with 2013 due to new stock option grants in 2013 that were amortized in 2014 with no corresponding amortization required in 2013. Accounting fees decreased $17,000 in 2014 as compared with 2013 due to reduced annual audit costs in 2014 as compared with 2013. Legal expenses decreased $5,000 in 2014 as compared with 2013 due to reduced legal assistance requested. Consulting fees decreased $9,000 in 2014 as the Company used fewer consultants in 2014 as compared with 2013. Insurance expenses related to the Company’s director and officers’ liability insurance policy increased $11,000 in 2014 as compared with the same period in 2013 due to a higher premium. Other selling, general and administrative expenses, net, decreased by $7,000 for the nine months ended September 30, 2014 compared with the same period in 2013.

 

Loss from Operations

 

The resulting effect on these changes in gross profits, operations expenses, and selling, general and administrative expenses was a decrease in loss from operations in 2014. For the nine months ended September 30, 2014, the Company had a loss from operations of $432,000 compared with a loss from operations of $461,000 for the nine months ended September 30, 2013, a decrease of $29,000.

  

Liquidity and Capital Resources

 

The Company’s net loss for the nine months ended September 30, 2014 was $473,000. Non-cash expenses totaled $299,000 for the nine months ended September 30, 2014 primarily due to stock options expense, stock compensation expense, and amortization of debt discount. Related party payable decreased $40,000 in 2014. Changes in operating assets and liabilities provided $101,000 of cash in 2014. Net cash used by operating activities for operations was $113,000 for the nine months ended September 30, 2014.

 

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The Company has incurred significant losses from operations, resulting in an accumulated deficit of $49,962,000 at September 30, 2014. The Company expects such losses to continue. However, on September 30, 2012, the Company entered into a Loan Agreement with Director Kevin Schewe whereby Dr. Schewe agreed to fund the Company up to $1,000,000 over a five year period. The Company expects loans from Dr. Schewe and contracts from the sublicense to GKG to fund the operations for the foreseeable future. The Company expects to continue as a going concern, however no assurance can be given that Dr. Schewe will continue to fund the Company or that contracts will be obtained in the future, or if obtained, that such contracts will be profitable or generate cash for the Company. Without proceeds from additional financings, future net revenues or loans from Dr. Schewe, the Company could not continue as a going concern. As of November 13, 2014, the Company had remaining availability under the note of $413,000. Based upon our cash requirements for our plan of operations and our current dividend policy of investing any available cash to our operations, we do not plan to distribute any cash to our shareholders.

 

Contractual Obligations

 

There are no long-term contractual obligations other than employment agreements as detailed below.

 

Employment Agreements

 

Effective October 1, 2014, the Company entered into one-year employment agreements with Carl Kukkonen and Stephen Muzi. Dr. Kukkonen serves as Chief Executive Officer of the Company and Mr. Muzi serves as Chief Financial Officer, Treasurer and Secretary. Dr. Kukkonen will receive a salary of $169,744 per annum and Mr. Muzi would receive $63,654 per annum. Each of them would also be entitled to a bonus as determined by the Company’s Board of Directors, customary insurance and health benefits, and reimbursement for out-of-pocket expenses in the course of his employment. Additionally, Dr. Kukkonen is to receive 20 business days paid leave per year and Mr. Muzi is to receive 10 business days paid leave.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

This information is not required of smaller reporting companies.

 

ITEM 4. CONTROLS AND PROCEDURES

 

We maintain a system of disclosure controls and procedures that are designed for the purpose of ensuring that information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and the Principal Accounting Officer, as appropriate to allow timely decisions regarding required disclosures.

 

For the period ended September 30, 2014, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act. In the course of this evaluation, our management considered the material weakness in our internal control over financial reporting as discussed in our Annual Report on Form 10-K for the period ended December 31, 2013. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of the period covered by this report on Form 10-Q, our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the registrant’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. To overcome this weakness, our principal executive and financial officers have reviewed and provided additional substantive accounting information and data in connection with the preparation of this quarterly report.  Therefore, despite the weaknesses identified, our principal executive and financial officers believe that there are no material inaccuracies or omissions of material facts necessary to make the statements included in this report not misleading in light of the circumstances under which they are made.  

 

Changes in Internal Control over Financial Reporting

 

We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financing reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

 

There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2014 that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

The Company does not have any material legal proceedings as of September 30, 2014.

 

ITEM 1A. RISK FACTORS

 

Risk Factors Which May Affect Future Results

 

The Company cautions that the following important factors, among others, in some cases have affected and in the future could affect the Company’s actual results and could cause such results to differ materially from those expressed in forward-looking statements made by or on behalf of the Company.

 

There have been no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, other than as set forth below:

 

Risks Related To An Investment In Our Stock

 

We have incurred losses and anticipate continued losses for the foreseeable future.

 

Our net loss for the nine months ended September 30, 2014 and the year ended December 31, 2013 was $473,000 and $699,000, respectively. We have not yet achieved profitability and expect to continue to incur net losses until we recognize increased higher revenues from GKG related sales. Further, we no longer have any ownership interest in VGE, and therefore no longer have any revenue from framed artwork business. We will rely on the GKG licensing agreement we have put in place effective September 30, 2012, to generate revenues for our GKG grass business. Because we do not have an operating history upon which an evaluation of our prospects can be based, our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies seeking to develop new and rapidly evolving technologies. To address these risks, we must, among other things, respond to competitive factors, continue to attract, retain and motivate qualified personnel and continue to develop our technologies. We may not be successful in addressing these risks. We can give no assurance that we will achieve or sustain profitability.

 

Any future sale of a substantial number of shares of our common stock could depress the trading price of our common stock, lower our value and make it more difficult for us to raise capital.

 

Any sale of a substantial number of shares of our common stock (or the prospect of sales) may depress the price of our common stock.  In particular, we will need to raise additional capital to maintain any ongoing business. We anticipate that the issuance of newly-issued shares to maintain our business will likely be very dilutive.  In addition, these sales could lower our value and make it more difficult for us to raise capital.  Further, the timing of the sale of the shares of our common stock may occur at a time when we would otherwise be able to obtain additional equity capital on terms more favorable to us.

 

The Company has 1,800,000,000 authorized shares of common stock, of which 1,532,197,689 were issued and outstanding as of September 30, 2014. Of these issued and outstanding shares, 655,446,795 shares (42.8%) are currently held by our executive officers, directors, and principal shareholders including related parties (including Dr. Carl Kukkonen, CEO and Director; Mr. Stephen J. Muzi, CFO; Ms. Angelina Galiteva, Director; Dr. Kevin L. Schewe, Director; Mr. Khurram Irshad, Director; Mr. Sung Hsien Chang, former director of the Company; and Inter Pacific Arts Corporation, a former subsidiary of the Company).  Of the shares issued and outstanding at September 30, 2014, 570,387,607 are accounted by our transfer agent as restricted under Rule 144.  These shares could be released in the future if requested by the holder of the shares, subject to volume and manner of sale restrictions under Rule 144.  961,810,082 shares of the Company’s common stock are accounted for by our transfer agent as free trading at September 30, 2014.

 

We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of shares of our common stock will have on the market price of our common stock. Sales of substantial amounts of our common stock (including shares currently held by management and principal shareholders), or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock.

 

Our executive officers, directors (including current and former), principal shareholders and related parties own 42.8% of our voting stock, which may allow them to control substantially all matters requiring shareholder approval, and their interests may not align with the interests of our other shareholders.

 

Our executive officers, directors (including current and former), principal shareholders and related parties hold 42.8% of our outstanding shares as of September 30, 2014. In addition, on May 14, 2010, the Company filed with the Secretary of State of the State of Nevada a Certificate of Designation of Series A Preferred Stock. The Certificate was approved by the Board and did not require shareholder vote. The Certificate created a new class of preferred stock known as Series A Preferred Stock. There is one share designated as Series A Preferred Stock. One share of Series A Preferred Stock is entitled to 50.1% of the outstanding votes on all shareholder voting matters. Series A Preferred Stock has no dividend rights and no rights upon a liquidation event and is subject to cancellation when certain conditions are met.

 

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On May 14, 2010, the Company issued one share of Series A Preferred Stock to Mr. Chang related to the acquisition of IPA by VIASPACE and VGE. This empowers Chang with supermajority voting rights even after he holds less than a majority of outstanding voting securities.

 

Effective as of September 30, 2012, and pursuant to an Agreement to Grant Voting Rights and Transfer Preferred Share executed by Chang and Director Kevin Schewe, Chang granted Schewe an irrevocable proxy that permitted Schewe to vote the Preferred Share. This proxy lasts so long as the License (discussed in Note 8) remained exclusive to the Company. Upon the earlier of (i) the expiration of five years or (ii) the date when the Company reached a market capitalization of at least $50 million, the proxy would be cancelled as the Preferred Share would be transferred from Chang to Schewe.

  

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

 

On July 18, 2014, the Company issued 2,439,024 unregistered shares of common stock to Kevin Schewe, Director of the Company. The shares were issued related to the conversion by Schewe of one convertible note as discussed in detail in Note 4. The Company relied upon Section 4(2) of the Securities Act of 1933, as amended, for the offer and sale of its stock. It believed that Section 4(2) was available because the offer and sale was not a public offering of its securities and there was no general solicitation or general advertising involved in the offer or sale.

 

On July 29, 2014, the Company issued consultants 10,000,000 unregistered shares of the Company’s common stock for consulting services valued at $99,000. The Company relied upon Section 4(2) of the Securities Act of 1933, as amended, for the offer and sale of its stock. It believed that Section 4(2) was available because the offer and sale was not a public offering of its securities and there was no general solicitation or general advertising involved in the offer or sale.

 

On August 20, 2014, the Company issued consultants 120,000 unregistered shares of the Company’s common stock for consulting services valued at $960. The Company relied upon Section 4(2) of the Securities Act of 1933, as amended, for the offer and sale of its stock. It believed that Section 4(2) was available because the offer and sale was not a public offering of its securities and there was no general solicitation or general advertising involved in the offer or sale.

 

On August 20, 2014, the Company issued 3,289,474 unregistered shares of common stock to Kevin Schewe, Director of the Company. The shares were issued related to the conversion by Schewe of one convertible note as discussed in detail in Note 4. The Company relied upon Section 4(2) of the Securities Act of 1933, as amended, for the offer and sale of its stock. It believed that Section 4(2) was available because the offer and sale was not a public offering of its securities and there was no general solicitation or general advertising involved in the offer or sale.

 

On September 23, 2014, the Company issued 6,000,000 unregistered shares of common stock to Kevin Schewe, Director of the Company. The shares were issued related to the conversion by Schewe of one convertible note as discussed in detail in Note 4. The Company relied upon Section 4(2) of the Securities Act of 1933, as amended, for the offer and sale of its stock. It believed that Section 4(2) was available because the offer and sale was not a public offering of its securities and there was no general solicitation or general advertising involved in the offer or sale.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

ITEM 5. OTHER INFORMATION

 

None.

  

17
 

 

ITEM 6. EXHIBITS

 

(a) Exhibits

 

10.1 Senior Secured Convertible Promissory Note dated July 18, 2014 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed July 18, 2014).
10.2 Senior Secured Convertible Promissory Note dated August 20, 2014 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed August 20, 2014).
10.3 Senior Secured Convertible Promissory Note dated September 23, 2014 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed September 23, 2014).
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. *
101.INS XBRL Instance Document *
101.SCH XBRL Schema Document *
101.CAL XBRL Calculation Linkbase Document *
101.DEF XBRL Definition Linkbase Document *
101.LAB XBRL Label Linkbase Document *
101.PRE XBRL Presentation Linkbase Document *

 

* Filed herewith. 

  

[SIGNATURES PAGE FOLLOWS]

 

18
 

 

SIGNATURES

 

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

VIASPACE Inc.

(Registrant)

 
       
Date: November 13, 2014 By: /s/ CARL KUKKONEN  
    Carl Kukkonen  
    Chief Executive Officer (Principal Executive Officer)  
       
       
Date: November 13, 2014 By: /s/ STEPHEN J. MUZI  
    Stephen J. Muzi  
    Chief Financial Officer (Principal Financial and Accounting Officer)  

 

 

 

 

 

 

 

 

 

 

 

19

 

EX-31.1 2 viaspace_10q-ex3101.htm CERTIFICATION

EXHIBIT 31.1

    

CERTIFICATION

 

I, Carl Kukkonen, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of VIASPACE Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

 

4. The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals;

 

  c. Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d. Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

 

5. The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

 

  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

 

 

Date:  November 13, 2014 By: /s/ Carl Kukkonen  
    Carl Kukkonen  
    Chief Executive Officer  
    (principal executive officer)  

 

EX-31.2 3 viaspace_10q-ex3102.htm CERTIFICATION

EXHIBIT 31.2

   

CERTIFICATION

 

I, Stephen J. Muzi, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of VIASPACE Inc.;

 

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

 

4. The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals;

 

  c. Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d. Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

 

5. The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

 

  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

 

 

Date:  November 13, 2014 By: /s/ Stephen J. Muzi  
    Stephen J. Muzi  
    Chief Financial Officer  
    (principal financial and accounting officer)  

 

EX-32 4 viaspace_10q-ex32.htm CERTIFICATION

EXHIBIT 32

  

CERTIFICATION

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF TITLE 18,

UNITED STATES CODE)

 

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of Title 18, United States Code), each of the undersigned officers of VIASPACE Inc., a Nevada corporation (the “Company”), does hereby certify with respect to the Quarterly Report of the Company on Form 10-Q for the quarter ended September 30, 2014 as filed with the Securities and Exchange Commission (the “10-Q Report”) that:

 

  (1)   the 10-Q Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  (2)   the information contained in the 10-Q Report fairly presents, in all material respects, the financial condition and results of operations of the Company.        

 

       
Date: November 13, 2014   /s/ Carl Kukkonen  
    Carl Kukkonen   
    Chief Executive Officer (principal executive officer)  
       
Date: November 13, 2014   /s/ Stephen J. Muzi  
    Stephen J. Muzi   
    Chief Financial Officer (principal financial and accounting officer)  

 

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On October 28, 2014, the Board of Directors of the Company voted to change the Conversion Price in the Agreement from 80% of the Average Trading Price as reported by the principal trading exchange on which the Company&#146;s Common Stock is traded for the twenty (20) trading days preceding the date of the Note to 50% of the Average Trading Price as reported by the principal trading exchange on which the Company&#146;s Common Stock is traded for the twenty (20) trading days preceding the date of the Note.</font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">&#160;</font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">On October 28, 2014, the Board of Directors of the Registrant ratified and approved that the number of reserved shares of common stock under the 2005 Stock Incentive Plan be equal to 30% of the total number of shares of common stock issued and outstanding as of the close of business on the immediately preceding December 31, which is the last day of the Company&#146;s fiscal year.</font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">&#160;</font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">On November 6, 2014, Kevin Schewe, advanced an additional $40,000 pursuant to the convertible loan agreement and immediately converted the $40,000 loan into 10,000,000 shares of Company common stock at a conversion price of $0.004 per common share. 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6. NET LOSS PER SHARE (Details-EPS) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Basic and diluted net income (loss) per share:        
Numerator : Net loss attributable to common stock $ (116,000) $ (197,000) $ (473,000) $ (522,000)
Denominator        
Weighted average shares of common stock outstanding 1,521,372,286 1,474,163,688 1,509,793,310 1,459,097,682
Net loss per share of common stock, basic and diluted $ 0 $ 0 $ 0 $ 0
XML 14 R9.htm IDEA: XBRL DOCUMENT v2.4.0.8
4. SHORT-TERM AND LONG-TERM DEBT
9 Months Ended
Sep. 30, 2014
Debt Disclosure [Abstract]  
SHORT-TERM AND LONG-TERM DEBT

Loan Agreement with Dr. Kevin Schewe

 

Effective September 30, 2012, the Company entered into a Loan Agreement with Director Kevin Schewe whereby Dr. Schewe agreed to loan up to $1 million to the Company over a five-year period based on requests from the Company. The loans would be evidenced by a Secured Convertible Note. Each individual loan will accrue interest at 6% per annum and are secured by all assets of the Company. Each note would mature on the second anniversary of the issuance date of such note. Each note is convertible at Dr. Schewe’s request, into a fixed number of shares of the Company’s common stock based on the closing price of the Company’s common stock for the twenty trading days prior to the issuance of the loan, less a 20% discount. In connection with the separation from VGE as discussed in Note 1, Chang granted Dr. Schewe an irrevocable proxy that permits him to vote the Preferred Share, giving him the majority shareholder vote. As the controlling shareholder of the Company he has the ability to increase the number of authorized shares without additional shareholder approval. As such, if the outstanding balance on the loan was convertible into more shares than the Company has authorized, he has the ability to increase the authorized shares. As a result, the conversion feature is not deemed to be a derivative instrument subject to bifurcation.

 

From January 1, 2014 through September 30, 2014, Dr. Schewe made loans of $183,000 to the Company. The Company recorded a discount on the loans of $46,000 as a result of a beneficial conversion feature, which will be amortized over the term of the note on a straight-line basis, which approximates the effective interest method. During 2014, Dr. Schewe converted loans totaling $183,000 into 22,590,844 common shares of the Company. At the time of the conversions, the company recorded the discount as additional interest expense. As of September 30, 2014, the Company had remaining availability under the note of $475,000. 

 

On October 28, 2014, the Board of Directors of the Company voted to change the Conversion Price in the Agreement from 80% of the Average Trading Price as reported by the principal trading exchange on which the Company’s Common Stock is traded for the twenty (20) trading days preceding the date of the Note to 50% of the Average Trading Price as reported by the principal trading exchange on which the Company’s Common Stock is traded for the twenty (20) trading days preceding the date of the Note.

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3. STOCK OPTIONS, WARRANTS AND ISSUED STOCK
9 Months Ended
Sep. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
STOCK OPTIONS, WARRANTS AND ISSUED STOCK

The fair value of each stock option granted is estimated on the date of the grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model has assumptions for risk free interest rates, dividends, stock volatility and expected life of an option grant. The risk free interest rate is based upon market yields for United States Treasury debt securities at a maturity near the term remaining on the option. Dividend rates are based on the Company’s dividend history.  The stock volatility factor is based on the historical volatility of the Company’s stock price. The expected life of an option grant is based on management’s estimate as no options have been exercised in the Plan to date. The Company calculated a forfeiture rate for employees and directors based on historical information. A forfeiture rate of 0% is used for options granted to consultants. The fair value of each option grant to employees, directors and consultants is calculated by the Black-Scholes method and is recognized as compensation expense on a straight-line basis over the vesting period of each stock option award. There have been no stock options issued in 2014. For stock options issued to employees, directors, consultants and advisory board members in 2013, the fair value was estimated at the date of grant using the following range of assumptions: 

 

    2013  
Risk free interest rate     2.00% - 2.06%  
Dividends     0%  
Volatility factor     134.81% 138.17%  
Expected life     6.67 years  
Annual forfeiture rate     0%  

  

The following table summarizes activity for employees and directors in the Company’s Plan at September 30, 2014:

 

    Number of
Shares
    Weighted-
Average
Exercise
Price Per
Share
    Weighted-
Average
Remaining
Contractual
Term In Years
    Aggregate
Intrinsic
Value
 
Outstanding at December 31, 2013     73,408,000     $ 0.0132                  
Granted                            
Exercised                            
Forfeited                            
Outstanding at September 30, 2014     73,408,000     $ 0.0132       6.14     $ 97,000  
Exercisable at September 30, 2014     69,658,000     $ 0.0132       5.99     $ 97,000  

 

There were no stock options granted in 2014. The Plan recorded $35,000 of compensation expense for employees and director stock options in 2014.  At September 30, 2014, there was $43,000 of unrecognized compensation costs related to non-vested share-based compensation arrangements under the Plan that is expected to be recognized over a weighted average period of approximately one year. At September 30, 2014, the fair value of options vested for employees and directors was $578,000.  There were no options exercised during 2014.

 

During 2014, the Company issued 273,846 unregistered shares of common stock to a consultant for services provided to the Company. These share issuances were recorded at $2,880 which is the fair market value determined by the price of the Company’s common stock trading on the OTC Markets on the date of grant.

XML 17 R2.htm IDEA: XBRL DOCUMENT v2.4.0.8
BALANCE SHEETS (USD $)
Sep. 30, 2014
Dec. 31, 2013
Statement of Financial Position [Abstract]    
Cash and equivalents $ 21,000 $ 6,000
Prepaid expenses 277,000 233,000
Other current assets 5,000 0
TOTAL CURRENT ASSETS 303,000 239,000
FIXED ASSETS, NET 1,000 1,000
OTHER ASSETS:    
Other assets 1,000 1,000
TOTAL OTHER ASSETS 1,000 1,000
TOTAL ASSETS 305,000 241,000
Accounts payable 56,000 32,000
Accrued expenses 91,000 60,000
Unearned revenue 73,000 37,000
Related party payables 640,000 680,000
TOTAL CURRENT LIABILITIES 860,000 809,000
COMMITMENTS AND CONTINGENCIES      
STOCKHOLDERS' EQUITY (DEFICIT):    
Preferred stock, $0.001 par value, 10,000,000 shares authorized, one share of Series A preferred stock issued and outstanding in 2014 and 2013 0 0
Common stock, $0.001 par value, 1,800,000,000 shares authorized, 1,532,197,689 and 1,489,332,999 shares issued and outstanding in 2014 and 2013, respectively 1,532,000 1,489,000
Additional paid in capital 47,875,000 47,432,000
Accumulated deficit (49,962,000) (49,489,000)
Total stockholders' deficit (555,000) (568,000)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 305,000 $ 241,000
XML 18 R6.htm IDEA: XBRL DOCUMENT v2.4.0.8
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
9 Months Ended
Sep. 30, 2014
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business – VIASPACE Inc. (“we”, “us”, “VIASPACE”, or the “Company”) was founded in July 1998. Its business involves renewable energy and is based on biomass, in particular our license to a dedicated energy crop with the trademark “Giant King® Grass” (“GKG”). Through a sublicense for GKG we obtained from VIASPACE Green Energy Inc. (“VGE”), we are able to commercialize GKG throughout the world, except for the People’s Republic of China (“China”) and the Republic of China (“Taiwan”).

 

GKG can be burned in 100% biomass power plants to generate electricity; made into pellets that can be burned together with coal to reduce carbon emissions from existing power plants; generate bio methane through anaerobic digestion, and can be used as a feedstock for low carbon liquid biofuels for transportation, biochemicals and bio plastics. Cellulosic ethanol, bio butanol and other liquid cellulosic biofuels, do not use corn or other food sources as feedstock. GKG can also be used as animal feed. GKG and other plants absorb and store carbon dioxide from the atmosphere as they grow. When they are burned, they release the carbon dioxide back into the atmosphere, but it is the same carbon dioxide that was removed from the atmosphere, and so this process is carbon neutral. Small amounts of fossil fuel are used by the farm equipment, transportation of GKG and fertilizer, so that the overall process of growing and burning GKG probably has some net carbon dioxide emissions, but much lower emissions than burning coal or other fossil fuels directly to create the same amount of energy. GKG has been independently tested by customers and been shown to have excellent energy content, high bio methane production, and the cellulosic sugar content needed for biofuels and biochemicals.

 

Going Concern – The Company has incurred significant losses from operations, resulting in an accumulated deficit of $49,962,000. The Company expects such losses to continue. However, on September 30, 2012, as discussed in Note 4, the Company entered into a Loan Agreement with Dr. Kevin Schewe, a member of the Company’s Board of Directors, whereby Dr. Schewe agreed to fund the Company up to $1,000,000 over a five year period in accordance with such agreement. The Company expects loans from Dr. Schewe and revenue generated from future contracts using the sublicense it has for Giant King Grass to fund operations for the foreseeable future. However no assurance can be given that Dr. Schewe will continue to fund the Company or that contracts will be obtained in the future, or if they are obtained, that they will be profitable. Accordingly, there continues to be substantial doubt as to the Company’s ability to continue as a going concern. The financial statements do not include any other adjustments that might result from the outcome of these uncertainties. 

 

Basis of Presentation - The accompanying unaudited financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Results for interim periods should not be considered indicative of results for a full year. These interim financial statements should be read in conjunction with the financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. The accounting policies used in preparing these financial statements are the same as those described in Note 1 to the financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included.

 

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results and outcomes may materially differ from management’s estimates and assumptions.

 

Reclassifications of prior year’s data have been made to conform to 2014 classifications. Such classifications had no effect on net loss reported in the statements of operations.

 

Recently Issued Accounting Pronouncements – In May 2014, the FASB issued new guidance on the recognition of revenue. The guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Our adoption begins with the first fiscal quarter of fiscal year 2017. Early adoption is not permitted. We are currently evaluating the impact of the adoption of this accounting standard update on our results of operations or financial position.

  

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern (ASU 2014-15).  The guidance in ASU 2014-15 sets forth management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that, when preparing financial statements for interim and annual financial statements, management should evaluate whether conditions or events, in the aggregate, raise substantial doubt about the entity's ability to continue as a going concern for one year from the date the financial statements are issued or are available to be issued. This evaluation should include consideration of conditions and events that are either known or are reasonably knowable at the date the financial statements are issued or are available to be issued, as well as whether it is probable that management's plans to address the substantial doubt will be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods and annual periods thereafter. Early application is permitted.  The adoption of this guidance is not expected to have a material impact on the Company’s financial statements.

 

Subsequent Events - We have evaluated events and transactions subsequent to the balance sheet date. Based on this evaluation, we are not aware of any events or transactions (other than those disclosed in Note 9) that occurred subsequent to the balance sheet date but prior to filing that would require recognition or disclosure in our financial statements.

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4. SHORT-TERM AND LONG-TERM DEBT (Details Narrative) (USD $)
9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Debt Disclosure [Abstract]    
Proceeds from related party $ 183,000 $ 190,000
Discount on loans from shareholder 46,000  
Loans converted into shares, shares issued 22,590,844  
Amount remaining under the loan $ 475,000  
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6. NET LOSS PER SHARE (Details-Equivalents)
9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Earnings Per Share [Abstract]    
Common stock equivalents excluded from EPS 73,408,000 68,408,000

XML 22 Show.js IDEA: XBRL DOCUMENT /** * Rivet Software Inc. * * @copyright Copyright (c) 2006-2011 Rivet Software, Inc. All rights reserved. * Version 2.4.0.3 * */ var Show = {}; Show.LastAR = null, Show.hideAR = function(){ Show.LastAR.style.display = 'none'; }; Show.showAR = function ( link, id, win ){ if( Show.LastAR ){ Show.hideAR(); } var ref = link; do { ref = ref.nextSibling; } while (ref && ref.nodeName != 'TABLE'); if (!ref || ref.nodeName != 'TABLE') { var tmp = win ? win.document.getElementById(id) : document.getElementById(id); if( tmp ){ ref = tmp.cloneNode(true); ref.id = ''; link.parentNode.appendChild(ref); } } if( ref ){ ref.style.display = 'block'; Show.LastAR = ref; } }; Show.toggleNext = function( link ){ var ref = link; do{ ref = ref.nextSibling; }while( ref.nodeName != 'DIV' ); if( ref.style && ref.style.display && ref.style.display == 'none' ){ ref.style.display = 'block'; if( link.textContent ){ link.textContent = link.textContent.replace( '+', '-' ); }else{ link.innerText = link.innerText.replace( '+', '-' ); } }else{ ref.style.display = 'none'; if( link.textContent ){ link.textContent = link.textContent.replace( '-', '+' ); }else{ link.innerText = link.innerText.replace( '-', '+' ); } } }; XML 23 R7.htm IDEA: XBRL DOCUMENT v2.4.0.8
2. PREPAID EXPENSES
9 Months Ended
Sep. 30, 2014
Prepaid Expense and Other Assets, Current [Abstract]  
PREPAID EXPENSES

The Company has entered into agreements with certain of its consultants and vendors whereby the Company issued registered shares of its common stock under an existing registration statement on Form S-8 as well as unregistered shares of common stock in exchange for future services to be provided to the Company. At September 30, 2014 and December 31, 2013, the total remaining value of these agreements was $186,000 and $182,000, respectively, which is included in prepaid expenses in the accompanying balance sheets. The Company has engaged a third party provider to pay certain expenses of the Company on behalf of the Company. As compensation for the payment of these expenses on behalf of the Company, the Company pays the provider in shares of common stock equivalent to the expense paid plus a fee equal to 15% of the expense paid. In 2014, the Company issued 20,000,000 unregistered shares of the Company’s common stock with a value of $219,000 in advance of the payments made by the provider. As of September 30, 2014 and December 31, 2013, included in prepaid expenses for this third party provider is $186,000 and $114,000, respectively, for shares of stock issued to the provider in excess of amounts paid on the Company’s behalf. Other prepaid expenses (stock related) were zero and $68,000 as of September 30, 2014 and December 31, 2013, respectively. For the three months ended September 30, 2014 and 2013, the Company recorded $64,000 and $115,000, respectively, of stock related expenses. For the nine months ended September 30, 2014 and 2013, the Company recorded $218,000 and $287,000, respectively, of stock related expenses.

 

Other prepaid expenses (non stock related) were $91,000 and $51,000 at September 30, 2014 and December 31, 2013, respectively.

XML 24 R3.htm IDEA: XBRL DOCUMENT v2.4.0.8
BALANCE SHEETS (Parenthetical) (USD $)
Sep. 30, 2014
Dec. 31, 2013
Statement of Financial Position [Abstract]    
Preferred stock par value $ 0.001 $ 0.001
Preferred stock shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 1 1
Preferred stock, shares outstanding 1 1
Common stock par value $ 0.001 $ 0.001
Common stock shares authorized 1,800,000,000 1,800,000,000
Common stock, shares issued 1,532,197,689 1,489,332,999
Common stock, shares outstanding 1,532,197,689 1,489,332,999
XML 25 R17.htm IDEA: XBRL DOCUMENT v2.4.0.8
6. NET LOSS PER SHARE (Tables)
9 Months Ended
Sep. 30, 2014
Earnings Per Share, Basic and Diluted, Other Disclosures [Abstract]  
Common Stock Equivalents Not Included in Loss per Share
   2014   2013 
Stock Options   73,408,000    68,408,000 
Computation of basic and diluted net loss per share

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2014     2013     2014     2013  
Basic and diluted net loss per share:                                
                                 
Numerator:                                
Net loss attributable to common stock   $ (116,000 )   $ (197,000 )   $ (473,000 )   $ (522,000 )
Denominator:                                
Weighted average shares of common stock outstanding     1,521,372,286       1,474,163,688       1,509,793,310       1,459,097,682  
Net loss per share of common stock, basic and diluted   $ *     *     *     *  

 

*  Less than $0.01

XML 26 R1.htm IDEA: XBRL DOCUMENT v2.4.0.8
Document and Entity Information
9 Months Ended
Sep. 30, 2014
Nov. 13, 2014
Document And Entity Information    
Entity Registrant Name VIASPACE Inc.  
Entity Central Index Key 0001270200  
Document Type 10-Q  
Document Period End Date Sep. 30, 2014  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Is Entity a Well-known Seasoned Issuer? No  
Is Entity a Voluntary Filer? No  
Is Entity's Reporting Status Current? Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   1,557,987,163
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2014  
XML 27 R18.htm IDEA: XBRL DOCUMENT v2.4.0.8
2. PREPAID EXPENSES (Details Narrative) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Dec. 31, 2013
Consultant agreements remaining value $ 186,000   $ 186,000   $ 182,000
Stock issued for payment of fees, shares     20,000,000    
Stock issued for payment of fees, amount     219,000    
Prepaid expenses paid by third party 186,000   186,000   114,000
Stock related expenses 64,000 115,000 218,000 287,000  
Stock related [Member]
         
Other prepaid expenses 0   0   68,000
Non stock related [Member]
         
Other prepaid expenses $ 91,000   $ 91,000   $ 51,000
XML 28 R4.htm IDEA: XBRL DOCUMENT v2.4.0.8
STATEMENTS OF OPERATIONS (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Income Statement [Abstract]        
REVENUES $ 55,000 $ 9,000 $ 125,000 $ 72,000
COST OF REVENUES 8,000 7,000 28,000 22,000
GROSS PROFIT 47,000 2,000 97,000 50,000
OPERATING EXPENSES        
Operations 12,000 7,000 43,000 24,000
Selling, general and administrative 135,000 171,000 486,000 487,000
Total operating expenses 147,000 178,000 529,000 511,000
LOSS FROM OPERATIONS (100,000) (176,000) (432,000) (461,000)
OTHER INCOME (EXPENSE)        
Interest expense (21,000) (21,000) (46,000) (61,000)
Other income 5,000 0 5,000 0
Total other expense (16,000) (21,000) (41,000) (61,000)
LOSS BEFORE INCOME TAXES (116,000) (197,000) (473,000) (522,000)
INCOME TAXES 0 0 0 0
NET LOSS $ (116,000) $ (197,000) $ (473,000) $ (522,000)
LOSS PER SHARE OF COMMON STOCK - Basic and diluted $ 0 $ 0 $ 0 $ 0
WEIGHTED AVERAGE SHARES OUTSTANDING - Basic and diluted 1,521,372,286 1,474,163,688 1,509,793,310 1,459,097,682
XML 29 R12.htm IDEA: XBRL DOCUMENT v2.4.0.8
7. RELATED PARTY TRANSACTIONS
9 Months Ended
Sep. 30, 2014
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

Included in the Company’s balance sheets at September 30, 2014 and December 31, 2013 are Related Party Payables. The Company has a payable of $640,000 at September 30, 2014 and $680,000 at December 31, 2013. Included in the amount at September 30, 2014 and December 31, 2013 is $640,000 owed to Dr. Kukkonen, CEO of the Company. Of the amount to Dr. Kukkonen, there is a cash component totaling $136,000 and a common stock component totaling $504,000. Dr. Kukkonen deferred a portion of his 2009, 2010 and 2011 stock awards and is entitled to the following unregistered shares of Company common stock at September 30, 2014: 11,195,707 shares for deferred 2009 compensation; 8,467,939 shares for deferred 2010 compensation; and 24,730,678 shares for deferred 2011 compensation.

 

Additionally, the Company agreed to pay VGE $40,000 by September 30, 2014 as reimbursement for legal fees and costs in connection with the separation of the Company and VGE. This amount was paid on September 25, 2014.

 

The Company has a loan agreement with Director Dr. Kevin Schewe which is described in Note 4.

 

On December 18, 2013, the Company entered into a Representation in Pakistan and Giant King Grass Supply contract with Winergy Pakistan Private Limited (“Winergy”), a company incorporated and existing under the laws of Pakistan. Mr. Khurram Irshad, a director of the Company, is a director and shareholder of Winergy. Winergy was also appointed the exclusive representative of the Company in Pakistan. Winergy is developing bioenergy and animal feed projects in Pakistan and seeking a biomass source. The Company's Giant King Grass will be supplied to Winergy and a propagation nursery and test plot is to be established in Pakistan. Winergy will operate and pay the expenses for a Giant King Grass propagation nursery and test plot in Pakistan. Winergy paid a one-time fee of $5,000 to the Company upon the signing of the contract. The Company expects to receive additional license fees in the future from Winergy when they are able to secure relationships with customers who will use the Company's Giant King Grass in their particular application. No additional revenues were received in 2014.

XML 30 R11.htm IDEA: XBRL DOCUMENT v2.4.0.8
6. NET LOSS PER SHARE
9 Months Ended
Sep. 30, 2014
Earnings Per Share, Basic and Diluted, Other Disclosures [Abstract]  
NET LOSS PER SHARE

The Company computes net loss per share in accordance with FASB ASC Topic 260.  Under its provisions, basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the periods presented.  Diluted earnings would customarily include, if dilutive, potential shares of common stock issuable upon the exercise of stock options and warrants.  The dilutive effect of outstanding stock options and warrants is reflected in earnings per share in accordance with FASB ASC Topic 260 by application of the treasury stock method.  For the periods presented, the computation of diluted loss per share equaled basic loss per share as the inclusion of any dilutive instruments would have had an antidilutive effect on the earnings per share calculation in the periods presented.

 

The following table sets forth common stock equivalents (potential common stock) at September 30, 2014 and 2013 that are not included in the loss per share calculation since their effect would be anti-dilutive for the periods indicated:

  

   2014   2013 
Stock Options   73,408,000    68,408,000 

 

The following table sets forth the computation of basic and diluted net loss per share for the three months ended September 30, 2014 and 2013, respectively:

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2014     2013     2014     2013  
Basic and diluted net loss per share:                                
                                 
Numerator:                                
Net loss attributable to common stock   $ (116,000 )   $ (197,000 )   $ (473,000 )   $ (522,000 )
Denominator:                                
Weighted average shares of common stock outstanding     1,521,372,286       1,474,163,688       1,509,793,310       1,459,097,682  
Net loss per share of common stock, basic and diluted   $ *     *     *     *  

 

*  Less than $0.01

XML 31 R23.htm IDEA: XBRL DOCUMENT v2.4.0.8
5. STOCKHOLDERS' EQUITY (Details Narrative) (USD $)
9 Months Ended
Sep. 30, 2014
Equity [Abstract]  
Unregistered shares of common stock issued for services 20,273,846
Fair value of stock issued for services $ 222,000
XML 32 R19.htm IDEA: XBRL DOCUMENT v2.4.0.8
3. STOCK OPTIONS, WARRANTS AND ISSUED STOCKS (Details-Assumptions)
12 Months Ended
Dec. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Risk free interest rate - minimum 2.00%
Risk free interest rate - maximum 2.06%
Dividends 0.00%
Volatility factor - minimum 134.81%
Volatility factor - maximum 138.17%
Expected life 6 years 8 months 1 day
Annual forfeiture rate 0.00%
XML 33 R15.htm IDEA: XBRL DOCUMENT v2.4.0.8
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
9 Months Ended
Sep. 30, 2014
Accounting Policies [Abstract]  
Description of Business

Description of Business – VIASPACE Inc. (“we”, “us”, “VIASPACE”, or the “Company”) was founded in July 1998. Its business involves renewable energy and is based on biomass, in particular our license to a dedicated energy crop with the trademark “Giant King® Grass” (“GKG”). Through a sublicense for GKG we obtained from VIASPACE Green Energy Inc. (“VGE”), we are able to commercialize GKG throughout the world, except for the People’s Republic of China (“China”) and the Republic of China (“Taiwan”).

 

GKG can be burned in 100% biomass power plants to generate electricity; made into pellets that can be burned together with coal to reduce carbon emissions from existing power plants; generate bio methane through anaerobic digestion, and can be used as a feedstock for low carbon liquid biofuels for transportation, biochemicals and bio plastics. Cellulosic ethanol, bio butanol and other liquid cellulosic biofuels, do not use corn or other food sources as feedstock. GKG can also be used as animal feed. GKG and other plants absorb and store carbon dioxide from the atmosphere as they grow. When they are burned, they release the carbon dioxide back into the atmosphere, but it is the same carbon dioxide that was removed from the atmosphere, and so this process is carbon neutral. Small amounts of fossil fuel are used by the farm equipment, transportation of GKG and fertilizer, so that the overall process of growing and burning GKG probably has some net carbon dioxide emissions, but much lower emissions than burning coal or other fossil fuels directly to create the same amount of energy. GKG has been independently tested by customers and been shown to have excellent energy content, high bio methane production, and the cellulosic sugar content needed for biofuels and biochemicals.

Going Concern

Going Concern – The Company has incurred significant losses from operations, resulting in an accumulated deficit of $49,962,000. The Company expects such losses to continue. However, on September 30, 2012, as discussed in Note 4, the Company entered into a Loan Agreement with Dr. Kevin Schewe, a member of the Company’s Board of Directors, whereby Dr. Schewe agreed to fund the Company up to $1,000,000 over a five year period in accordance with such agreement. The Company expects loans from Dr. Schewe and revenue generated from future contracts using the sublicense it has for Giant King Grass to fund operations for the foreseeable future. However no assurance can be given that Dr. Schewe will continue to fund the Company or that contracts will be obtained in the future, or if they are obtained, that they will be profitable. Accordingly, there continues to be substantial doubt as to the Company’s ability to continue as a going concern. The financial statements do not include any other adjustments that might result from the outcome of these uncertainties. 

Basis of Presentation

Basis of Presentation - The accompanying unaudited financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Results for interim periods should not be considered indicative of results for a full year. These interim financial statements should be read in conjunction with the financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. The accounting policies used in preparing these financial statements are the same as those described in Note 1 to the financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included.

 

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results and outcomes may materially differ from management’s estimates and assumptions.

 

Reclassifications of prior year’s data have been made to conform to 2014 classifications. Such classifications had no effect on net loss reported in the statements of operations.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements – In May 2014, the FASB issued new guidance on the recognition of revenue. The guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Our adoption begins with the first fiscal quarter of fiscal year 2017. Early adoption is not permitted. We are currently evaluating the impact of the adoption of this accounting standard update on our results of operations or financial position.

 

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern (ASU 2014-15).  The guidance in ASU 2014-15 sets forth management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that, when preparing financial statements for interim and annual financial statements, management should evaluate whether conditions or events, in the aggregate, raise substantial doubt about the entity's ability to continue as a going concern for one year from the date the financial statements are issued or are available to be issued. This evaluation should include consideration of conditions and events that are either known or are reasonably knowable at the date the financial statements are issued or are available to be issued, as well as whether it is probable that management's plans to address the substantial doubt will be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods and annual periods thereafter. Early application is permitted.  The adoption of this guidance is not expected to have a material impact on the Company’s financial statements.

Subsequent Events

Subsequent Events - We have evaluated events and transactions subsequent to the balance sheet date. Based on this evaluation, we are not aware of any events or transactions (other than those disclosed in Note 9) that occurred subsequent to the balance sheet date but prior to filing that would require recognition or disclosure in our financial statements.

XML 34 R13.htm IDEA: XBRL DOCUMENT v2.4.0.8
8. OTHER COMMITMENTS AND CONTINGENCIES
9 Months Ended
Sep. 30, 2014
Commitments and Contingencies Disclosure [Abstract]  
OTHER COMMITMENTS AND CONTINGENCIES

Leases

 

The Company currently has no long term office lease. The Company leases land in San Diego County, California where it grows Giant King Grass. Rent expense charged to operations for the three and nine months ended September 30, 2014 was $6,000 and $12,000, respectively. Rent expense charged to operations for three and nine months ended September 30, 2013 was $4,000 and $8,000, respectively.

 

Collaborative Agreements

 

We are a party to certain collaborative agreements with various entities for the joint operation of test plots to establish that GKG grows well in the area and optimal agronomic practices are developed. These agreements are in the form of development collaborations and licensing agreements. Under these agreements, we have granted rights to grow and use of GKG. In return, we are entitled to receive certain payments for the operations of the test plots and license fees on the harvesting of GKG should it ultimately be commercialized.

 

All of our collaborative agreements are subject to termination by either party, without significant financial penalty. Under the terms of these agreements, upon a termination we are entitled to reacquire all rights in our technology at no cost and are free to re-license the technology to other collaborative partners.

 

Revenue earned from collaborative agreements is comprised of negotiated payments for the establishment and operations of the test plots. Deferred revenue represents customer payments received which are related to future performance. Generally for collaborative agreements establishing test plots, the Company recognizes revenue only after the Giant King Grass is planted in the customer’s location. Until that time any money received is recorded as deferred revenue. Once the planting is complete, the collaborative agreement payments are amortized over a period of six and one-half months which represents the growing season of Giant King Grass. During the three and nine months ended September 30, 2014, the Company received $59,000 and $162,000, respectively, in payments under these collaborative agreements. During the three and nine months ended September 30, 2013, the Company received $25,000 and $51,000, respectively, in payments under these collaborative agreements. The payments were deferred until the planting of the seedlings and then recorded as revenue through the date of the first harvest. The Company recognized revenue from these collaborative agreements of $55,000 and $9,000 for the three months ended September 30, 2014 and 2013, respectively. The Company recognized revenue from these collaborative agreements of $125,000 and $72,000 for the nine months ended September 30, 2014 and 2013, respectively.

 

License Agreement

 

Effective as of September 30, 2012, VIASPACE and VGE entered into a Supply, License and Commercialization Agreement (“License Agreement”) pursuant to which VGE granted to VIASPACE a nontransferable, royalty-bearing exclusive license to commercialize Giant King Grass anywhere within the world other than China and Taiwan. Additionally, the License Agreement allows VIASPACE to use the Giant King Grass intellectual property and VIASPACE Green Energy trade name in connection with its efforts to commercialize Giant King Grass. The Company assigned no value to the sublicense due to uncertainties of future revenues.

 

VIASPACE agreed that it would not during the term of the License Agreement and a three-year period thereafter, (i) manufacture, commercialize or otherwise engage in any research or development of a grass or any other product or material having similar or otherwise competitive properties to Giant King Grass.

 

VGE agreed to provide VIASPACE with Giant King Grass seedlings that will be filled at an agreed upon price as set forth in the License Agreement. VIASPACE agreed to pay VGE for and during the Term a royalty of eight percent (8%) on net sales made in its territory.

 

The initial term of the License Agreement is for two years (“Initial Term”). As a condition to the right to renew after the first two-year term for an additional two year term, VIASPACE needed to achieve the milestones in the first two year period:

 

  o One or more fully-executed, third party sales contracts for the sale of Giant King Grass shall have been entered into during the Initial Term, pursuant to which VIASPACE is to be paid an aggregate amount of at least $200,000 within that 24 consecutive monthly period; and two or more, third party growing locations of at least 10 hectares in total shall have been obtained and planted during the Initial Term. The Company has entered into various collaborative agreements with entities for the joint operation of test plots to satisfy these milestones.

 

These milestones were achieved by the Company as of September 30, 2014 and the license was renewed for another two years.

 

As a condition to the right to renew the First Renewal Term (for years five and six) of the License Agreement, the Company is to achieve during the First Renewal Term the following milestones by September 30, 2016 as a condition to any such renewal:

 

• A total of least three or more (including the above) fully-executed, third party sales contracts for the sale of Giant King Grass shall have been entered into during the First Renewal Term, pursuant to which the Registrant is to be paid the aggregate amount of $400,000, with not less than $100,000 of the Initial Sales Milestone having been paid during the First Renewal Term and with the remaining unpaid balance of the Initial Sales Milestone being paid within six months of the Second Renewal Term (e.g., in the fifth year) and the Second Sales Milestone being paid in full within that 24 consecutive monthly period following the signing of any such third contract; and

 

• A total of at least three or more (including the two above) growing locations of at least 30 hectares in total shall have been obtained and planted during the Second Renewal Term, which shall be subject to the reasonable satisfaction of VGE.

 

Employment Agreements

 

Effective October 1, 2013, the Company entered into one-year employment agreements with Carl Kukkonen and Stephen Muzi. Dr. Kukkonen serves as Chief Executive Officer of the Company and Mr. Muzi serves as Chief Financial Officer, Treasurer and Secretary. Dr. Kukkonen will receive a salary of $164,800 per annum and Mr. Muzi would receive $61,800 per annum. Each of them would also be entitled to a bonus as determined by the Company’s Board of Directors, customary insurance and health benefits, and reimbursement for out-of-pocket expenses in the course of his employment. Additionally, Dr. Kukkonen is to receive 20 business days paid leave per year and Mr. Muzi is to receive 10 business days paid leave.

 

Litigation

 

The Company is not party to any material legal proceedings at the present time.

XML 35 R14.htm IDEA: XBRL DOCUMENT v2.4.0.8
9. SUBSEQUENT EVENTS
9 Months Ended
Sep. 30, 2014
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

On October 23, 2014, the Company issued 10,000,000 unregistered shares of common stock to a consultant for prepaid services to be provided to the Company. These share issuances were recorded at $71,000 which is the fair market value determined by the price of the Company’s common stock trading on the OTC Markets on the date of grant.

 

On October 29, 2014, Kevin Schewe, advanced an additional $22,000 pursuant to the convertible loan agreement and immediately converted the $22,000 loan into 5,789,474 shares of Company common stock at a conversion price of $0.0038 per common share.

 

The Company entered into one-year employment agreements with Carl Kukkonen and Stephen Muzi on October 28, 2014 that are effective for the period from October 1, 2014 through September 30, 2015. Dr. Kukkonen serves as Chief Executive Officer of the Company and Mr. Muzi serves as Chief Financial Officer, Treasurer and Secretary. Dr. Kukkonen will receive a salary of $169,744 per annum and Mr. Muzi will receive $63,654 per annum.

 

On October 28, 2014, two million non-qualified stock options were issued to Director Angelina Galiteva, two million non-qualified stock options were issued to Director Khurram Irshad and eight million non-qualified stock options were issued to Director Kevin Schewe. Additionally, on October 28, 2014, eight million incentive stock options were issued to Carl Kukkonen and four million incentive stock options were issued to Stephen Muzi. All of the stock options will be granted at fair market value with a 2-year vesting period on a quarterly basis.

 

The Company entered into a Senior Secured Convertible Promissory Note (the "Agreement") with Kevin Schewe, Director, on September 28, 2012. On October 28, 2014, the Board of Directors of the Company voted to change the Conversion Price in the Agreement from 80% of the Average Trading Price as reported by the principal trading exchange on which the Company’s Common Stock is traded for the twenty (20) trading days preceding the date of the Note to 50% of the Average Trading Price as reported by the principal trading exchange on which the Company’s Common Stock is traded for the twenty (20) trading days preceding the date of the Note.

 

On October 28, 2014, the Board of Directors of the Registrant ratified and approved that the number of reserved shares of common stock under the 2005 Stock Incentive Plan be equal to 30% of the total number of shares of common stock issued and outstanding as of the close of business on the immediately preceding December 31, which is the last day of the Company’s fiscal year.

 

On November 6, 2014, Kevin Schewe, advanced an additional $40,000 pursuant to the convertible loan agreement and immediately converted the $40,000 loan into 10,000,000 shares of Company common stock at a conversion price of $0.004 per common share. Following this issuance, the Company had remaining availability under the note of $413,000.

XML 36 R16.htm IDEA: XBRL DOCUMENT v2.4.0.8
3. STOCK OPTIONS, WARRANTS AND ISSUED STOCKS (Tables)
9 Months Ended
Sep. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Fair value assumptions
    2013  
Risk free interest rate     2.00% - 2.06%  
Dividends     0%  
Volatility factor     134.81% 138.17%  
Expected life     6.67 years  
Annual forfeiture rate     0%  
Employee and Director Option Grants
    Number of
Shares
    Weighted-
Average
Exercise
Price Per
Share
    Weighted-
Average
Remaining
Contractual
Term In Years
    Aggregate
Intrinsic
Value
 
Outstanding at December 31, 2013     73,408,000     $ 0.0132                  
Granted                            
Exercised                            
Forfeited                            
Outstanding at September 30, 2014     73,408,000     $ 0.0132       6.14     $ 97,000  
Exercisable at September 30, 2014     69,658,000     $ 0.0132       5.99     $ 97,000  
XML 37 R21.htm IDEA: XBRL DOCUMENT v2.4.0.8
3. STOCK OPTIONS, WARRANTS AND ISSUED STOCK (Details Narrative) (USD $)
9 Months Ended
Sep. 30, 2014
Stock options granted 0
Compensation expense $ 35,000
Unrecognized compensation costs related to non-vested shares 43,000
Weighted average period of unrecognized compensation costs 1 year
Fair value of options vested 578,000
Options exercised 0
Stock issued for services, shares issued 20,273,846
Stock issued for services, value 222,000
Consultant [Member]
 
Stock issued for services, shares issued 273,846
Stock issued for services, value $ 2,880
XML 38 R26.htm IDEA: XBRL DOCUMENT v2.4.0.8
7. RELATED PARTY TRANSACTIONS (Details Narrative) (USD $)
Sep. 30, 2014
Dec. 31, 2013
Related party payables $ 640,000 $ 680,000
Carl Kukkonen [Member]
   
Related party payables 640,000 680,000
Viaspace Green Energy [Member]
   
Legal fees payable $ 0 $ 40,000
XML 39 R5.htm IDEA: XBRL DOCUMENT v2.4.0.8
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (473,000) $ (522,000)
Adjustments to reconcile net loss to net cash used in operating activities:    
Stock option compensation 35,000 9,000
Stock issued for consulting expenses 218,000 287,000
Amortization of debt discount 46,000 61,000
(Increase) decrease in:    
Prepaid expenses 42,000 36,000
Increase (decrease) in:    
Accounts payable 23,000 (38,000)
Accrued expenses and other 0 (28,000)
Unearned revenue 36,000 (16,000)
Related party (40,000) 0
Net cash used in operating activities (113,000) (211,000)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Payments on financed insurance 0 (1,000)
Net cash used in investing activities 0 (1,000)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Loans from related party 183,000 190,000
Payments made on financed insurance (55,000) (7,000)
Net cash provided by financing activities 128,000 183,000
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 15,000 (29,000)
CASH AND CASH EQUIVALENTS, Beginning of period 6,000 50,000
CASH AND CASH EQUIVALENTS, End of period 21,000 21,000
Cash paid during the period for:    
Interest 0 0
Income taxes 0 0
Supplemental Disclosure on Non-Cash Activities    
Stock issued for future services 219,000 417,800
Discount on loans as a result of beneficial conversion feature 46,000 61,000
Stock issued for accounts payable   35,000
Stock cancelled for nonperformance   50,000
Director and officer insurance premium financed $ 86,416 $ 68,223
XML 40 R10.htm IDEA: XBRL DOCUMENT v2.4.0.8
5. STOCKHOLDERS' EQUITY
9 Months Ended
Sep. 30, 2014
Equity [Abstract]  
STOCKHOLDERS' EQUITY

During 2014, the Company issued 20,273,846 unregistered shares of common stock to employees, consultants and vendors for services provided or to be provided to the Company. These share issuances were recorded at $222,000 which is the fair market value determined by the price of the Company’s common stock trading on the OTC Markets on the date of grant. As of September 30, 2014, there were 1,532,197,689 shares of common stock outstanding.

 

The Company issued 22,590,844 shares of common stock to Director Kevin Schewe as he converted loans into shares of common stock as allowed under an agreement he has with the Company as discussed in Note 4.

XML 41 R27.htm IDEA: XBRL DOCUMENT v2.4.0.8
8. OTHER COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Commitments and Contingencies Disclosure [Abstract]        
Rent Expense $ 6,000 $ 4,000 $ 12,000 $ 8,000
Proceeds from collaborative agreements 59,000 25,000 162,000 51,000
Revenue recognized from collaborative agreements $ 55,000 $ 9,000 $ 125,000 $ 72,000
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3. STOCK OPTIONS, WARRANTS AND ISSUED STOCK (Details-Option activity) (USD $)
9 Months Ended
Sep. 30, 2014
Number of Shares  
Outstanding, beginning balance 73,408,000
Granted 0
Exercised 0
forfeited 0
Outstanding, ending balance 73,408,000
Exercisable, ending balance 67,408,000
Weighted Average Exercise Price Per Share  
Outstanding, beginning balance $ 0.0132
Outstanding, ending balance $ 0.0132
Exercisable, ending balance $ 0.0132
Weighted Average Remaining Contractual Terms in Years  
Outstanding, ending balance 6 years 1 month 21 days
Exercisable, ending balance 5 years 11 months 27 days
Aggregate Intrinsic Value  
Outstanding, ending balance $ 97,000
Exercisable, ending balance $ 97,000