0001019687-14-001130.txt : 20140331 0001019687-14-001130.hdr.sgml : 20140331 20140331160114 ACCESSION NUMBER: 0001019687-14-001130 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20131231 FILED AS OF DATE: 20140331 DATE AS OF CHANGE: 20140331 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-110680 FILM NUMBER: 14730042 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-K 1 viaspace_10k-123113.htm FORM 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the fiscal year ended December 31, 2013

 

OR

 

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number: 333-110680

 

VIASPACE INC.

(Exact name of registrant as specified in its charter)

  

 Nevada   76-0742386
(State or other jurisdiction of   (I.R.S. Employer Identification No.)
incorporation or organization)    
     
382 N. Lemon Ave, Suite 364    
Walnut, California   91789
(Address of principal executive offices)   (Zip Code)

   

(626) 768-3360

Issuer’s telephone number

 

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o   No x

   

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o   No x

 

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 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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x   No o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check One):

 

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 Exchange Act). Yes o   No x

  

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $10,235,783

 

State the number of shares outstanding of each of issuer’s classes of common equity, as of March 28, 2014: 1,504,338,461

 
 

 

VIASPACE INC.

TABLE OF CONTENTS

 

    Page
Part I    
Item 1. Business 3
Item 1A. Risk Factors 6
Item 1B. Unresolved Staff Comments 13
Item 2. Properties 13
Item 3. Legal Proceedings 13
Item 4. Mine Safety Disclosures 13
     
Part II    
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 14
Item 6. Selected Financial Data 15
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 18
Item 8. Financial Statements and Supplementary Data

18

F-1 to F-16

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 18
Item 9A. Controls and Procedures 18
Item 9B. Other Information 19
     
Part III    
Item 10. Directors, Executive Officers, Promoters, Control Persons and Corporate Governance 20
Item 11. Executive Compensation 23
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 26
Item 13. Certain Relationships and Related Transactions, and Director Independence 27
Item 14. Principal Accountant Fees and Services 28
     
Part IV    
Item 15. Exhibits and Financial Statement Schedules 29
     
Signatures   32

   

1
 

 

FORWARD-LOOKING STATEMENTS

 

This document and the documents incorporated by reference herein contain forward-looking statements. We have based these statements on our beliefs and assumptions, based on information currently available to us. These forward-looking statements are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations, our total market opportunity and our business plans and objectives set forth under the sections entitled “Description of Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

Forward-looking statements are not guarantees of performance. Our future results and requirements may differ materially from those described in the forward-looking statements. Many of the factors that will determine these results and requirements are beyond our control. In addition to the risks and uncertainties discussed in “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” investors should consider those discussed under “Risk Factors Which May Affect Future Results” and, among others, the following:

 

  · our ability to successfully implement our business strategy,

 

  · market acceptance of our products and product development,

 

  · the effect of regulation on our ability to commercialize our products,

 

  · the impact of competition and changes to the competitive environment on our products and services, and

 

  · other factors detailed from time to time in our filings with the Securities and Exchange Commission.

 

These forward-looking statements speak only as of the date of this report. We do not intend to update or revise any forward-looking statements to reflect changes in our business anticipated results of our operations, strategy or planned capital expenditures, or to reflect the occurrence of unanticipated events, except as required by law.

 

PART I

 

ITEM 1. BUSINESS

 

Overview

 

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

 

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.

 

Through September 30, 2012, VIASPACE owned 75.6% of the equity interests of VGE. VGE and its subsidiaries Inter Pacific Arts Corporation (“IPA BVI”) and Guangzhou Inter Pacific Arts (“IPA China”) specialize in the manufacturing of high quality, copyrighted, framed artwork sold in US retail chain stores. In addition, VGE has an exclusive license to Giant King Grass, a proprietary dedicated energy crop for a period described below. On September 30, 2012, the Company executed agreements to formalize the separation of the Company and VGE and cause the orderly transfer of all of the Company's equity interest in VGE to Changs, LLC, a company controlled by Sung Chang, President of VGE and a former Director of the Company. In addition, agreements have been executed which give VGE the right to commercially develop Giant King Grass in China and Taiwan and give VIASPACE the right to commercially develop Giant King Grass in the world other than China and Taiwan. Under the agreements, the VIASPACE secured debt previously owed to Chang will not have to be paid although it may be used to offset any outside claims made against Chang. Since the Company no longer has any equity interest in VGE, the Company can no longer consolidate the operations of VGE into the operations of the Company. The operating results of VGE prior to September 30, 2012 are shown as discontinued operations in the Company’s financial statements.

 

The Company’s web site is www.VIASPACE.com. Information contained on, or accessible through, our website should not be deemed as part of this report.

 

2
 

Corporate History

 

ViaSpace Technologies LLC (“ViaSpace LLC”) was founded in July 1998 as a private company to commercialize proven space and defense technologies from NASA and the Department of Defense. ViaSpace LLC had licensed patents, and software technology from California Institute of Technology (“Caltech”), which manages the Jet Propulsion Laboratory (“JPL”) for NASA. On June 22, 2005, ViaSpace LLC acquired the non-operating shell company Global-Wide Publication Ltd. (“GW”). GW was incorporated in the State of Nevada on July 14, 2003. At merger, GW was renamed VIASPACE Inc. The transaction was accounted for as a reverse merger and a recapitalization of the Company. VIASPACE became a public company on June 22, 2005.

 

Prior to December 31, 2012, the Company had a controlling interests in Direct Methanol Fuel Cell Corporation (“DMFCC) and Ionfinity LLC (“Ionfinity”). Through these entities the Company was dedicated to commercializing proven space and defense technologies from NASA and the Department of Defense into hardware and software products. Additionally, these entities had an expertise in energy/fuel cells, microelectronics, sensors and software for defense, homeland security and public safety, information and computational technology. The operations of each of these entities were wound down during 2011 and 2012 and the Company disposed of them at the end of 2012.

 

On October 21, 2008, the Company through its wholly-owned subsidiary VIASPACE Green Energy (“VGE”), acquired an equity interest in Inter-Pacific Arts, Inc. (“IPA BVI”), a British Virgin Islands profitable company that manufactures high quality, copyrighted, framed artwork at its factory in the People’s Republic of China (“PRC’), and sells the framed art to large retailers in the US. IPA, through its wholly-owned subsidiary, Guangzhou Inter-Pacific Arts Corp., a Chinese wholly owned foreign enterprise registered in Guangdong province (“IPA China”) also has a worldwide license to cultivate and sell Giant King Grass — a natural hybrid, non-genetically modified, extremely fast-growing, perennial grass that is suitable for livestock feed as well as a feedstock for biofuel production. 

 

On September 30, 2012, VIASPACE disposed of its ownership interests in VGE and entered into a Supply, License and Commercialization Agreement (“License Agreement”) with VGE pursuant to which VGE granted to VIASPACE a nontransferable, royalty-bearing exclusive license to commercialize Giant King Grass everywhere in 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.

 

Grass Business Division

 

The Company focuses on GKG, a natural hybrid, non-genetically modified, fast-growing, perennial grass which we are growing as a dedicated energy crop that can be used to generate low carbon and renewable electricity by direct burning in a biomass power plant, and can be made into pellets that can replace some of the coal in existing power plants thus reducing carbon emissions. GKG may also be used to produce bio methane through anaerobic digestion and as a feedstock for non-food liquid biofuels such as bio ethanol and bio butanol. It can also be used as a feedstock for biochemicals and bio plastics. This perennial grass can grow up to 14 feet in height. It can be harvested at least twice a year in tropical and semitropical areas with a yield of up to 375 metric tons per hectare (freshly cut, referred to as wet yield). We believe that GKG has the highest yield of any crop. Note that one hectare (ha) is 10,000 square meters and equal to 2.47 US acres or approximately the size of two US football fields.

 

GKG has been independently tested by multiple potential customers. Proximate and ultimate analyses are available as well as ash composition, biogas production test data and sugar composition, pretreatment and hydrolysis data are available. To our knowledge, the results have been very positive and consistent. GKG has excellent energy content of 18.4 megajoules (MJ) per dry kilogram. Its chemical and physical properties are very similar to corn straw, which is material left behind from the corn plant after the ear of corn has been harvested. Corn straw is used as fuel in many biomass power plants, and a leading international biomass power provider, has declared GKG as suitable for their power plants. The bio methane production from GKG has been tested in three customer laboratories and shows the outstanding production of 91 liters of methane per kilogram of fresh grass. The methane can be used to generate clean electricity or can be burned to produce process heat. There are potentially thousands of biogas plants worldwide that may use GKG. A large European electric utility has tested GKG and examined prototype pellets. In addition to these current markets, GKG can be used as animal feed and has been tested for this purpose.

 

GKG can also be used as a feedstock to make cellulosic biofuels such as bio ethanol, bio butane and green gasoline. Three companies have recently tested GKG as a potential feedstock for producing biofuels, biochemicals and bio plastics through fermentation method. Laboratory results from these tests show that GKG has almost identical composition including sugar content as corn straw or wheat straw which are the agricultural waste products often targeted as a feedstock for cellulosic biofuels. The projected bio ethanol yield is approximately 80 gallons per dry ton of GKG based on these tests.

 

3
 

Corn straw and wheat straw are the leftovers after food production. This agricultural waste material can only be collected after the food is harvested which means that the feedstock supply is very seasonal and must be stored for a long time--up to one year-- between harvests. To support a single biofuel or power plant, agricultural waste must be collected from farms up to 50 or more miles away. Giant King Grass is a high yield dedicated nonfood energy crop that can be harvested at any time in a tropical or subtropical climate. If the biofuel or power plant is co-located with a GKG plantation, the collection radius will only be about 3 miles. The high yield and logistical advantages mean that GKG can be grown and delivered to a co-located plant at a substantially lower price than currently paid for agricultural waste. The largest operating cost of a biomass power plant or biofuels plant is the cost of the fuel or feedstock, and the low cost and high quality of GKG are of major interest to these customers.

 

Energy pellets made from dried GKG can be used as a replacement for coal in electricity generating power plants. Reports by the U.S. Department of Energy state that 15% to 20% of coal used in the power plant may be replaced by burning grass in an existing power plant with only minor modifications. This process called co-firing allows utilization of the large capital investment in existing coal fired power plants while reducing their carbon dioxide emissions by 15 to 20%. GKG and other biomass have lower mercury, arsenic and sulfur emissions than coal.

 

During 2012 and 2013, , we have entered into Giant King Grass supply agreements with partners in Arizona, St. Croix Virgin Islands, Nicaragua, South Africa and Myanmar. We have shipped Giant King Grass to these countries as part of the collaborative agreements. The first phase for each of these partners is for the joint operation of test plots to establish that GKG grows well in the area and optimal agronomic practices are developed. Once this initial phase is completed, each partner will expand the initial growing site as they develop more land to grow GKG. Each partner has different planned uses for the Giant King Grass.

 

We grow Giant King Grass on leased land in San Diego County, California. This location serves as a nursery for our Giant King Grass and a place from which we can harvest Giant King Grass seedlings and send them to customers in the US and throughout the world.

 

We plan to expand our grass business into other areas of the world, and are in discussions with developers of power plants, pellet mills and biogas facilities throughout the world outside of China and Taiwan.

 

Having a reliable source of feedstock is critical for all energy users of biomass. Today, power plants and pellet mills use agricultural and forestry waste such as corn straw, wheat straw, rice husks and wood waste as feedstock. Increasing demand for biomass has caused the price of this agricultural and forestry waste to rise dramatically and in some places it is in short supply. Biomass supply issues have caused power plants to become unprofitable, idle or abandoned. We believe that dedicated energy crops such as GKG may be necessary and advantageous for successful operation of biomass processing facilities. Agricultural waste will still be used, but the dedicated energy crop could provide a reliable and consistent base. In part because of the feedstock uncertainty issue, many proposed biomass power plant and biogas projects have been unable to obtain financing. A dedicated energy crop may help alleviate this obstacle.

 

Because of its high yield, GKG provides feedstock with less use of land and we believe therefore lower costs compared to its alternatives. Other energy crops providing half the yield will require twice the land and therefore land and other costs are nearly doubled.

 

Another major advantage of GKG is that it can be harvested at any time-- particularly in a tropical or subtropical area. When corn straw is used, there is a delay for the corn to mature before any feedstock is produced. Then at the corn harvest, a lot of feedstock is available all at one time. This corn straw has to be collected, stored and used until the next corn harvest which will be one year later. This creates a major logistics issue. If the climate permits, GKG can be planted so that it matures continuously and allows just-in-time harvesting.

  

Higher food prices have led to food shortages around the globe. This argument has resonated with many world leaders and resulted in a global effort to derive biofuels from plants that are not in the human food chain. Using such plants as fuel sources helps avoid the political issue and perception that prices are rising because foods are being diverted for use as biofuels. These plants are called cellulosic biofuels.

 

Cellulosic biofuels are based on nonfood plants including grass, shrubs and trees. These plants do not have a lot of sugar and cannot be fermented directly like corn. They do, however, have a lot of cellulose in their leaves, stalks and branches which contain carbon and hydrogen which can then be converted into ethanol called cellulosic ethanol. GKG has been recently tested and shown to have potential for producing cellulosic biofuels including ethanol and for making biochemicals and bio plastics using a fermentation process.

 

4
 

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.

 

Under a contract plantation establishment and licensing model, the customer would provide the land, labor and management and be responsible for growing GKG. We will provide initial seedlings, crop management services and knowledge transfer for a negotiated price. In addition, there would be an ongoing license fee based on grass production.

 

Management believes both models will be important contributors to our revenue streams. We believe all our revenues initially will result from the integrated plantation & end-user model. Rapid global expansion requires local joint venture partners that have land and labor, but lack the energy crop and the expertise to grow it. The contract plantation establishment and licensing model with joint venture partners will be used for most of these projects. We may also serve as a developer for integrated Giant King Grass plantations and bioenergy projects.

 

Other VIASPACE Projects

 

The Company retains a worldwide nonexclusive license to certain patents and patent applications in the areas of interactive radio technology; however, the Company is devoting no attention to this license.

  

Research and Development

 

The Company did not record any research and development activities in 2013 or 2012. If we do in the future, it will be expensed as incurred.

 

Competition

 

Many companies, universities and research laboratories worldwide are investigating grass as a feedstock for cellulosic ethanol and other applications. Monsanto is an example of a large company focusing on grass as a biofuel. Ceres is an example of company focusing on biomass and grass in particular. Much of the competition is looking at miscanthus or switchgrass. These grasses are suitable for temperate areas. Much of the competition also is focused on selling seeds. GKG is a natural hybrid that is not genetically modified nor generally available, and to our knowledge no one else is growing GKG besides VGE, as a commercial crop. Based on publicly available data on switchgrass and miscanthus, compared to our data on GKG, we believe that GKG has higher productivity than these and other competing grasses. GKG is most suitable for tropical and subtropical areas, which are the focus of the company’s efforts. Because GKG is propagated by seedlings and not by seeds, it is not an invasive species. The Company is focusing on projects involving growing the grass and securing long-term supply contracts for biofuel production, as a replacement for coal and electricity generation, and as animal feed. With long-term supply contracts and joint ventures, we plan to capture these recurring revenue streams.

 

Other grasses such as alfalfa are suitable for animal feed and are also competitors of GKG.

 

Many of our competitors have substantially greater financial, research, human resources, and product development capabilities. In addition, many of our competitors have greater experience in marketing such technologies and products and greater potential to develop revenue streams. As a result, our competitors may be able to develop and expand their competing product offerings more rapidly, adapt to new or emerging technologies and changes in customer requirements more quickly, devote greater resources to marketing and sales of their products and adopt more aggressive pricing policies than we can.

 

Customers

 

The Company has a relatively small number of customers that have planted Giant King Grass. We believe this concentration of sales made to a small number of customers will continue in the near future. A loss of any customer by the Company could significantly reduce our future revenues.

 

Intellectual Property

 

On or about October 20, 2008, IPA China entered into an agreement with China Gate whereby VGE purchased seedlings of GKG and other grasses from China Gate and the parties agreed to assist each other in growing, developing and commercializing GKG. The agreement does not limit IPA China’s right to grow, harvest and market the grass anywhere in the world. No term was specified in the agreement. To our knowledge, China Gate has not entered into similar agreements with any other party.

 

5
 

On September 30, 2012, IPA China granted to VGE a reciprocal worldwide license for GKG, not to exceed the rights IPA China had in GKG.  Additionally on 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 everywhere in 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.

 

VIASPACE agreed that it would not during the term of the License Agreement and for a three-year period thereafter, 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.

 

In accordance with the License Agreement, VGE will provide VIASPACE with Giant King Grass seedlings at an agreed upon price. Further, VIASPACE will pay VGE 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, VISPACE needs to achieve the milestones in the first two year period:

 

• 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 expects to meet the milestones by September 30, 2014 and renew the license for an additional two year term.

 

There are additional milestones that need to be met as a condition to renew the license for subsequent two year periods, in order for VIASPACE to maintain the license.

 

Employees

 

As of December 31, 2013 we have 2 full time employees and 2 part time employees based in the US. We believe that our relations with our employees are good. We have never had a work stoppage, and our employees are not subject to a collective bargaining agreement.

 

Regulatory Issues

 

None

 

Trademarks

 

The Company has trademark registrations for “VIASPACE”.

 

ITEM 1A. RISK FACTORS

 

Our business is subject to a number of risks. You should carefully consider the following risk factors, together with all of the other information included or incorporated by reference in this report, before you decide whether to purchase our common stock. The risks set out below are not the only risks we face. If any of the following risks occur, our business, financial condition and results of operations could be materially adversely affected. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment. We wish to caution that the following important factors, among others, in some cases have affected and in the future could affect our actual results and could cause such results to differ materially from those expressed in forward-looking statements made by or on behalf of us.

 

Risks Related To Our Business

 

We are dependent on our grass business and if such business should not succeed, we may be forced to terminate our company.

 

The Company has a nontransferable, royalty-bearing exclusive license to commercialize Giant King Grass everywhere in 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. If such business should fail, then we may be forced to terminate our company as we have no other business.

 

In particular, we must (1) receive an aggregate revenue amount of at least $200,000; and (2) have Giant King Grass planted in at least two third party locations measuring at least 10 hectares in total, by September 30, 2014. If we are unable meet this milestone, we may be forced to forfeit our Giant King Grass sub-license.

 

6
 

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

 

Our net loss for the year ended December 31, 2013 was $699,000. We have not yet achieved profitability and expect to continue to incur net losses until we recognize increased 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 or 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.

 

Our ability to continue as a going concern is dependent on future revenues or future financing.

 

Hein & Associates LLP, our independent registered public accounting firm, included an explanatory paragraph in its report on our financial statements for 2013, which expresses substantial doubt about our ability to continue as a going concern. The inclusion of a going concern explanatory paragraph in Hein & Associates LLP’s report on our financial statements could have a detrimental effect on our stock price and our ability to raise additional capital if needed. On September 30, 2012, the Company entered into Loan Agreement with Director Kevin Schewe whereby Dr. Schewe agreed to fund the Company up to $1,000,000 over the next five years 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.

  

Our financial statements were prepared on the basis of a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have not made any adjustments to the financial statements as a result of the outcome of the uncertainty described above. Accordingly, the value of the Company in liquidation may be different from the amounts set forth in our financial statements.

 

Our continued success will depend on our ability to achieve profitability or to raise capital in order to fund the development and commercialization of our products. Failure to be profitable or to raise additional capital may result in substantial adverse circumstances, including our inability to continue the development of our products and our liquidation.

 

If we fail to comply with our obligations in our intellectual property licenses, we could lose license rights that are important to our business.

 

We are a party to a number of license agreements that are material to our business. We may enter into additional technology licenses in the future. Effective September 30, 2012, as explained in Note 2 to our financial statements (“Note 2”), we entered into a sublicense agreement with Mr. Chang and VGE pursuant to which VGE will sublicense their license to the GKG intellectual property to us. Because this is a sublicense arrangement, we are also dependent on Mr. Chang to maintain the license properly. Any failure by Mr. Chang to comply with its terms under its license may have a ripple effect that materially and adversely affects our sublicense with Mr. Chang.

 

These existing licenses impose and future licenses may impose various minimum royalty commitments, other royalties and other obligations on us.

 

In particular, we must (1) receive an aggregate revenue amount of at least $200,000; and (2) have Giant King Grass planted in at least two third party locations measuring at least 10 hectares in total, by September 30, 2014. If we are unable meet this milestone, we may be forced to forfeit our Giant King Grass sub-license.

 

If we fail to comply with these obligations, the licensors may have the right to terminate the license, in which event we might not be able to market any product that is covered by the licensors. We cannot assure you we will be able to obtain new licenses, or renew existing licenses, on commercially reasonable terms, if at all. Termination of the licenses could have a material adverse affect on our business, operating results and financial condition.

 

We have a sublicense relationship with respect to the GKG license. If the license from our sublicensor is cancelled, terminated or otherwise is adversely affected, our sublicense may be materially affected.

 

Under the License Agreement with VGE, we have a sublicense from VGE to commercialize GKG on a worldwide basis except China and Taiwan. VGE obtained the original license from China Gate. The term of this license from China Gate is not specified. China Gate has informed us that they have an exclusive license to the GKG in Guangdong province and North America and have granted VGE an exclusive sublicense to the same region. However, because we do not have a direct relationship with the holder of the intellectual property, any material adverse effect to the GKG license held by our sublicensors (either China Gate or VGE) would affect our rights as the sublicensee. The original licensor is aware of our China Gate sublicense and has consented to it. For instance, if our sublicensor fails to perform its obligations under its license with the original licensor, we would have no recourse against the original licensor and our rights with respect to the sublicense may be materially affected.

 

7
 

Our growth prospects may be materially and adversely affected if we are unable to develop or acquire new products or to produce our existing products in sufficient quantities.

 

We believe the future growth of our Company will depend on the value of our grass business for biofuel, power plant, or animal feed purposes. The ability to develop orders from customers, if at all, is uncertain due to several factors, many of which are beyond our control. These include changing customer preferences, competitive price pressures, the failure to adapt products to meet the evolving demands of customers in China, the development of higher-quality products by our competitors, and general economic conditions. If we are unable to develop or acquire additional products that meet the demands of our customers, or if our competitors develop products that are favored by our customers, our growth will be adversely affected.

 

In addition, our business depends on the success of our Giant King Grass business. Effective September 30, 2012, as explained in Note 2, we no longer own VGE, and therefore, we will no longer control the plantations where GKG is currently grown in the Guangdong province of China. Instead, under an agreement with VGE, VGE will be a supplier of seedlings to us. Since we will not directly own the farms, however, we are subject to greater risk if VGE is unable or unwilling to supply us the seedlings. For the long term prospects, we will likely have to produce GKG in other locations outside China including the US. If we are unable to generate our existing products in sufficient quantities – either from VGE or through our own locations - our growth prospects may be materially and adversely affected and our revenues and profitability may decline.

 

If we lose key personnel or are unable to hire additional qualified personnel, it could impact our ability to grow our business.

 

We believe our future success will depend in large part upon our ability to attract and retain highly skilled technical, managerial, sales and marketing, finance and operations personnel. We face intense competition for all such personnel, and we may not be able to attract and retain these individuals. Our failure to do so could delay product development, affect the quality of our products and services, and/or prevent us from sustaining or growing our business. In addition, employees may leave our company and subsequently compete against us. Key personnel include Dr. Carl Kukkonen, our chief executive officer. The loss of key personnel, especially if without advanced notice, could harm our ability to maintain and build our business operations. Furthermore, we have no key man life insurance for any of our key employees.

 

Our revenues to date have been to a few customers, the loss of which could result in a material decline in revenues.

 

In 2012 and 2013, the Company has recorded a minor amount of grass revenues related to several Giant King Grass supply contract agreements to a few customers. We believe this concentration of sales made to a small number of customers will continue in the near future. A loss of any customer by the Company could significantly reduce our future revenues.

 

Our success depends upon market acceptance of our technologies and product development.

 

The markets for our renewable energy technologies are either new or non-existent at the present time. Our success will depend upon the market acceptance of our various products and services. This acceptance may require in certain instances a modification to the culture and behavior of customers to be more accepting of other forms of technology. Potential customers may be reluctant or slow to adopt changes or new ways of performing processes. There is no assurance that our current or future products or services will gain widespread acceptance or that we will generate sufficient revenues to allow us to ever achieve profitability.

 

In addition, our products require continuing improvement and development. Our products may not succeed or may not succeed as intended. As a result, we may need to change our product offerings, discontinue certain products and services or pursue alternative product strategies. There is no assurance that we will be able to successfully improve our current products or that we will continue to develop or market some of our products and services.

  

We operate in competitive markets against companies that have significantly greater resources than we have.

 

Overall, the markets for our products are highly competitive and many of our competitors have greater resources and better name recognition than we do. We intend to compete primarily by leveraging our intellectual property rights and our unique product value added features.

 

Due to uncertainties in our business, the capital on hand may not be sufficient to fund our operations until we achieve positive cash flow.

 

We have expended and will continue to expend substantial amounts of money for research and development, capital expenditures, working capital needs and manufacturing and marketing of our products and services. Although we have reduced expenses significantly, our business requires funds for operations.

 

8
 

The exact timing and amount of spending required cannot be accurately determined and will depend on several factors, including:

 

  · progress of our research and development efforts;

 

  · competing technological and market developments;

 

  · commercialization of products currently under development by us and our competitors; and

 

  · market acceptance and demand for our products and services.

  

The cost of developing our technologies may require financial resources greater than we currently have available. Therefore, in order to successfully complete development of our technologies, we may be required to obtain additional financing. We cannot assure you additional financing will be available if needed or on terms acceptable to us. If adequate and acceptable financing is not available, we may have to delay development or commercialization of certain of our products and services or eliminate some or all of our development activities. We may also reduce our marketing or other resources devoted to our products and services. Any of these options could reduce our sales growth and result in continued net losses.

 

Failure of our internal controls over financial reporting could harm our business and financial results.

 

Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that we would prevent or detect a misstatement of our financial statements or fraud. Any growth in our business may place significant additional pressure on our system of internal control over financial reporting. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud. A significant financial reporting failure or material weakness in internal control over financial reporting could cause a loss of investor confidence and decline in the market price of our common stock.

 

Risks Related to our Grass Business

 

We currently have a few meaningful customers for our grass business and are starting to make progress. If we are unable to attract any customers or our existing customers do not continue operations, our grass business will suffer.

 

We commenced our grass business in October 2008. We recorded minor revenues in 2012. Our revenues increased from 2012 to 2013 but revenues are still not at a material or significant level. While we believe we will be able to attract customers and achieve revenues, we cannot assure you we will. There is no assurance that our potential customers will determine that using GKG for biomass or animal feed purposes will be commercially viable. Further such customers may find other grass or plant products superior to GKG for their needs. Furthermore, our customers may not be able to attract their internal financing to expand or continue their project using GKG. If any of these occur, our grass business will fail.

 

We could be subject to intellectual property rights claims regarding the seedlings.

 

We are subject to the risk that the seedlings we license infringe or will infringe upon patents, copyrights, trademarks or other intellectual property rights held by third parties. We acquired rights to grow GKG from a seller which we believe held such rights.  If that party does not hold such rights, we may be subject to legal proceedings and claims relating to the intellectual property of others. If any such claim arises in the future, litigation or other dispute resolution proceedings may be necessary to retain our ability to offer our current and future products, which could result in substantial costs and diversion of our management resources and attention even if we prevail in contesting such claims. If we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property rights, incur additional costs to license or develop alternative products and be forced to pay fines and damages, any of which could materially and adversely affect our business and results of operations, or terminate our grass business entirely.

 

We have a sublicense relationship with respect to the GKG license. If the license from our sublicensor is cancelled, terminated or otherwise is adversely affected, our sublicense may be materially affected.

 

We sublicense our intellectual property to the GKG from VGE which licenses the intellectual property from China Gate which licenses the intellectual property from the original licensor. The term of this license is not specified. China Gate informed VGE that they have an exclusive license to the GKG in Guangdong province and North America and have granted us an exclusive sublicense to the same region.  However, because we do not have a direct relationship with the holder of the intellectual property, any material adverse effect to the GKG license held by our sublicensor would affect our rights as the sublicensee. The original licensor is aware of our sublicense and has consented to it. For instance, if our sublicensor fails to perform its obligations under its license with the original licensor, we would have no recourse against the original licensor and our rights with respect to the sublicense may be materially affected.

 

9
 

The initial term of the GKG License Agreement is for two years. As a condition to the right to renew after the first two-year term for an additional two year term, VISPACE needs to achieve the milestones in the first two year period. If the Company does not meet these milestones, the Company would lose its GKG license and its business would fail. There are additional milestones that need to be met as a condition to renew the license for subsequent two year periods, in order for VIASPACE to maintain the license. 

 

Natural or man-made disasters could damage our crop production, which would cause us to suffer losses of production and a material reduction of revenues.

 

GKG is subject to the risks associated with growing crops, including natural disasters such as drought, pestilence, plant diseases and insect infestations, and man-made disasters such as environmental contamination. Other man-made incidents may damage our products, such as arson or other acts that may adversely affect our grass inventory in the winter storage season. Furthermore, natural or man-made disasters may cause farmers to migrate from the farmland, which would decrease the number of end users of our products. We are particularly susceptible to disasters or other incidents in the Guangdong province, where we have the greatest concentration of our operations. In the event of a widespread failure of our grass, we could likely sustain substantial loss of revenues and suffer substantial operating losses. We do not have insurance to protect against such a risk and we are not aware of the availability of any such insurance in China.

 

Our growth prospects may be materially and adversely affected if we are unable to develop or acquire new products or to produce our existing products in sufficient quantities.

 

We believe the future growth of our Company will depend on the value of our grass business for biofuel, power plant, or animal feed purposes. The ability to develop orders from customers, if at all, is uncertain due to several factors, many of which are beyond our control. These include changing customer preferences, competitive price pressures, the failure to adapt products to meet the evolving demands of customers, the development of higher-quality products by our competitors, and general economic conditions. If we are unable to develop or acquire additional products that meet the demands of our customers, if our competitors develop products that are favored by our customers, or if we are unable to produce our existing products in sufficient quantities, our growth prospects may be materially and adversely affected and our revenues and profitability may decline.

 

Our plans to increase production capacity in the grass business and expand into new markets may not be successful, which will adversely affect our operating results.

 

Our plans to develop our grass business and its production capacity has placed and will continue to place, substantial demands on our managerial, operational, technological and other resources. We are addressing three markets for GKG: feedstock for low-carbon liquid biofuels for transportation; fuel to burn in electricity generating power plants; and animal feed. We are also reviewing opportunities to grow grass in other areas of China, India, Indonesia, other areas of Southeast Asia and South America. These represent great opportunities for the company, but also represent a potential risk in losing focus and diluting management attention. If we fail to establish and manage the growth of our product offerings, operations and distribution channels effectively and efficiently in such business, we could suffer a material and adverse effect on our operations and our ability to capitalize on new business opportunities, either of which could materially and adversely affect our operating results.

 

We will need to develop new sales channels into the biofuel, electric power plant, and animal feed markets. Expansion into new markets may present operating and marketing challenges. If we are unable to anticipate the changing demands that expanding operations will impose on our production systems and distribution channels, or if we fail to develop our production systems and distribution channels to meet the demand, we could experience an increase in expenses and our results of operations could be adversely affected.

 

Our financial results are sensitive to fluctuations in market prices of the products that we offer.

 

The profitability of our operations is affected by the selling prices of our products. We intend to benchmark the prices of our grass against the prevailing domestic market prices of grass of similar quality and attributes, and set the prices accordingly. Historically, prices of grass and other agricultural products worldwide have been volatile, primarily due to fluctuations in supply and demand. If the prices for such products decline in the future, and we are unable sell more products and/or reduce our cost of sales, our revenues will decrease and our profitability will be adversely affected.

 

10
 

If we are unable to estimate customers’ future needs accurately and to match our production to the demand of our direct customers, our business, financial condition and results of operations may be materially and adversely affected.

 

Due to the nature of the grass industry, we normally grow according to our production plan before we sell and deliver grass to distributors and our direct customers. The potential end users of our grass, such as biofuel providers and livestock owners, generally make purchasing decisions for our products based on market prices, economic and weather conditions and other factors that we may not be able to anticipate accurately in advance. If we fail to accurately estimate the volume and types of products sought by our customers, we may produce more grass that is in demand by our distributors resulting in aged crops. In the event we decide not to sell the crop due to our concerns about the quality, the aged inventory could eventually be sold at greatly reduced prices. Aged inventory could result in asset impairment, in which case we would suffer a loss and incur an increase in our operating expenses. On the other hand, if we underestimate demand, we may not able to satisfy our customers’ demand for grass, and thus damage our customer relations and end-user loyalty. Our failure to estimate our customers’ future needs and to match our production to the demand of our direct customers may materially and adversely affect our business, financial condition and results of operations.

 

Grass prices and sales volumes may decrease in any given year with a corresponding reduction in sales, margins and profitability.

 

There may be periods of instability during which commodity prices and sales volumes may fluctuate greatly. Commodities can be affected by general economic conditions, weather, disease outbreaks and factors affecting demand, such as availability of financing and competition. Our attempts to differentiate our products from those of other grass producers have not prevented the grass market from having the characteristics of a commodity market. As a result, the price we are able to demand for our grass is dependent on the size of the supply of our grass and the grass of other producers. Therefore, the potential exists for fluctuation in supply, and consequently in price, in our own markets, even in the absence of significant external events that might cause volatility. As a result, the amount of revenue that we receive in any given year is subject to change. As production levels are determined prior to the time that the volume and the market price for orders is known, we may have too much or too little product available, which may materially and adversely affect our revenues, margins and profitability.

  

Risks Related To An Investment In Our Stock

 

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 1,489,332,999 were issued and outstanding as of December 31, 2013. Of these issued and outstanding shares, 660,220,534 shares (44.3%) 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. Sung Hsien Chang, former director; and IPA BVI, former subsidiary). Of the shares issued and outstanding at December 31, 2013, 580,887,500 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. 908,445,499 shares of the Company’s common stock are accounted for by our transfer agent as free trading at December 31, 2013.

 

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) and principal shareholders own 44.3% 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) and principal shareholders hold 44.3% of our outstanding shares as of December 31, 2013. 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.

 

11
 

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. Under the term sheet relating to the VGE Recapitalization, Chang would give a proxy to Director Dr. Schewe during the term of any GKG sublicense from VGE. Dr. Schewe may be willing to provide additional financing to the Company. In the event he provides such financing, his ownership in the Company will further increase.

 

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 2) 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.

 

Our stock price is likely to be highly volatile because of several factors, including a limited public float.

 

The market price of our stock is likely to be highly volatile because there has been a relatively thin trading market for our stock, which causes trades of small blocks of stock to have a significant impact on our stock price. You may not be able to resell our common stock following periods of volatility because of the market’s adverse reaction to volatility.

 

Other factors that could cause such volatility may include:

 

  · actual or anticipated fluctuations in our operating results;

 

  · announcements concerning our business or those of our competitors or customers;

 

  · changes in financial estimates by securities analysts or our failure to perform as anticipated by the analysts;

 

  · announcements of technological innovations;

 

  · conditions or trends in the industry;

 

  · introduction or withdrawal of products and services;

 

  · variation in quarterly results due to the fact our revenues are generated by sales to a limited number of customers which may vary from period to period;

 

  · litigation;

 

  · patents or proprietary rights;

 

  · departure of key personnel;

 

  · failure to hire key personnel; and

 

  · general market conditions.

 

Because our common stock is considered a “penny stock” any investment in our common stock is considered to be a high-risk investment and is subject to restrictions on marketability.

 

Our common stock is currently traded on the OTC Capital Markets (“OTCQB”) and is considered a “penny stock.” The OTCQB is generally regarded as a less efficient trading market than the NASDAQ Small Cap Market.

 

The SEC adopted rules that regulate broker-dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market. The broker-dealer also must provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer and any salesperson in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock.

  

Since our common stock is subject to the regulations applicable to penny stocks, the market liquidity for our common stock could be adversely affected because the regulations on penny stocks could limit the ability of broker-dealers to sell our common stock and thus your ability to sell our common stock in the secondary market. There is no assurance our common stock will be quoted on NASDAQ or the NYSE or listed on any exchange, even if eligible.

 

12
 

We have additional securities available for issuance, including preferred stock, which if issued could adversely affect the rights of the holders of our common stock.

 

Our articles of incorporation authorize issuance of 1,800,000,000 shares of common and 10,000,000 shares of preferred stock. The common and preferred stock can be issued by, and the terms of the preferred stock, including dividend rights, voting rights, liquidation preference and conversion rights can generally be determined by, our Board of Directors (“BOD”) without shareholder approval. Any issuance of preferred stock could adversely affect the rights of the holders of common stock by, among other things, establishing preferential dividends, liquidation rights or voting powers. Accordingly, our shareholders will be dependent upon the judgment of our management in connection with the future issuance and sale of shares of our common and preferred stock, in the event buyers can be found therefore. Any future issuances of common or preferred stock would further dilute the percentage ownership of our Company held by the public shareholders. Furthermore, the issuance of preferred stock could be used to discourage or prevent efforts to acquire control of our Company through acquisition of shares of common stock.

 

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 BOD 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. 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 as discussed in footnotes. 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 2) 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.

 

Warrants issued by the Company may have an adverse impact on the market value of our common stock.

 

The sale of stock issuable upon exercise of the warrants issued or issuable, or even the possibility of their sale, may adversely affect the trading market for our common stock and adversely affect the prevailing market price of our common stock. The existence of rights under such warrants to acquire our common stock at fixed prices may prove a hindrance to our efforts to raise future equity and debt funding, and the exercise of such rights will dilute the percentage ownership interest of our shareholders and may dilute the value of their ownership.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

 

The Company currently has no long term office lease. The Company leases land in San Diego County, California where it grows Giant King Grass. It maintains a mailing address in California, and its principal executive officers work in California.

 

ITEM 3. LEGAL PROCEEDINGS

 

None.

  

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

 

 

13
 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Prices

 

The shares of our common stock are principally quoted on the OTC Capital Markets (“OTCQB”) under the trading symbol “VSPC” since from June 22, 2005. Prior to June 22, 2005, the Company’s common stock was traded on the OTC Bulletin Board (“OTCBB”) under the symbol “GWPL.OB”. The first day of trading for the Company’s common stock was June 4, 2004.

 

The following table sets forth, for the fiscal quarters indicated, the high and low sale price for our common stock, as reported on the OTCBB or OTCQB. The price information in the table below reflects inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

  

Quarterly period   High     Low  
                 
Fiscal year ended December 31, 2013:                
First Quarter   $ .0158     $ .0108  
Second Quarter   $ .0158     $ .0100  
Third Quarter   $ .0155     $ .0071  
Fourth Quarter   $ .0148     $ .0100  
                 
Fiscal year ended December 31, 2012:                
First Quarter   $ .0105     $ .0069  
Second Quarter   $ .0110     $ .0014  
Third Quarter   $ .0050     $ .0014  
Fourth Quarter   $ .0150     $ .0013  

 

Holders

 

As of March 28, 2014, there were approximately 48 shareholders of record of the Company’s Common Stock.

 

Dividends

 

We have not paid any cash dividends on our common stock since our inception and do not anticipate paying any cash dividends on our common stock in the foreseeable future. There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends in the future. Our future dividend policy will be examined periodically by our BOD based upon conditions then existing, including our earnings and financial condition, capital requirements and other relevant factors.

 

Equity Compensation Plan

 

Our discussion regarding the Company’s equity compensation plans under which the Company’s equity securities are authorized for issuance are discussed under the section titled “Equity Compensation Plan Information” under “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stock Matters” below.

 

Recent Sales of Unregistered Securities

 

On October 25, 2013, the Registrant issued 1,491,228 shares of Registrant common stock to Kevin Schewe, Director of the Company. The shares were issued related to the conversion by Schewe of two convertible notes as discussed in detail in Item 1.01. The Registrant 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 not general solicitation or general advertising involved in the offer or sale.

 

Submission of Matters to a Vote of Security Holders

 

On December 31, 2013, a majority in voting interest of the stockholders of the Company and the Board of Directors of the Company voted to amend the Company's Articles of Incorporation and increase the number of shares of authorized common stock from one billion five hundred million (1,500,000,000) shares to one billion eight hundred million (1,800,000,000) shares. The par value of the common stock remains at one tenth of one cent ($0.001).

  

14
 

ITEM 6. SELECTED FINANCIAL DATA

 

None required for Company.

  

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

VIASPACE Overview

 

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

 

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.

 

Through September 30, 2012, VIASPACE owned 75.6% of the equity interests of VGE. VGE and its subsidiaries Inter Pacific Arts Corporation (“IPA BVI”) and Guangzhou Inter Pacific Arts (“IPA China”) specialize in the manufacturing of high quality, copyrighted, framed artwork sold in US retail chain stores. In addition, VGE has an exclusive license to Giant King Grass, a proprietary dedicated energy crop for a period described below. On September 30, 2012, the Company executed agreements to formalize the separation of the Company and VGE and cause the orderly transfer of all of the Company's equity interest in VGE to Changs, LLC, a company controlled by Sung Chang, President of VGE and a former Director of the Company. In addition, agreements have been executed which give VGE the right to commercially develop Giant King Grass in China and Taiwan and give VIASPACE the right to commercially develop Giant King Grass in the world other than China and Taiwan. Under the agreements, the VIASPACE secured debt previously owed to Chang will not have to be paid although it may be used to offset any outside claims made against Chang. Since the Company no longer has any equity interest in VGE, the Company can no longer consolidate the operations of VGE into the operations of the Company. The operating results of VGE prior to September 30, 2012 are shown as discontinued operations in the Company’s financial statements.

 

The Company’s web site is www.VIASPACE.com. Information contained on, or accessible through, our website should not be deemed as part of this report.

 

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 consolidated 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.

 

15
 

For the year ending December 31, 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.

 

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 consolidated 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

 

Year Ended December 31, 2013 Compared to December 31, 2012

 

Revenues

 

Revenues were $105,000 and $32,000 for the year ended December 31, 2013 and 2012, respectively, an increase of $73,000. 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 $31,000 and $41,000 for the year ended December 31, 2013 and 2012, respectively, a decrease of $10,000. 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 year ended December 31, 2013 compared to the same period in 2012 was an increase in gross profit from a gross loss of $9,000 for the year ended December 31, 2012 to gross profit of $74,000 for the year ended December 31, 2013. During 2013, the Company recognized gross profit related to the collaborative agreements due to lower than expected costs to oversee the establishment of the Giant King Grass test plot in the customers’ locations.

 

Operations Expenses

 

Operations expenses were $29,000 and $34,000 for the year ended December 31, 2013 and 2012, respectively, a decrease of $5,000. Operations expense is composed of plantation expenses related to the Company’s test plot in California and costs associated with agronomy support and travel for potential customers.

 

16
 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses were $679,000 and $874,000 for the year ended December 31, 2013 and 2012, respectively, a decrease of $195,000. Stock compensation expense decreased $410,000 in 2013 as compared with 2012 as less stock was issued by the Company to pay its employees. Stock option compensation expense decreased $66,000 in 2013 as compared with 2012 due to the completion of vesting of some stock option grants in 2012. Payroll and benefits increased $210,000 for the year ended December 31, 2013 as compared to the same period in 2012 due to higher compensation levels in 2013 and the Company paying its employees in cash as opposed to stock. Legal fees decreased $83,000 in 2013 as compared with 2012 due to higher levels of legal fees in 2012 associated with the separation of the Company from VGE. Accounting fees increased $17,000 in 2013 as compared with 2012 due to increased costs associated with the Company’s annual audit and quarterly reviews. Consulting fees increased $34,000 in 2013 as the Company hired additional consultants in 2013 as compared with 2012. Public relations expenses increased $62,000 in 2013 as the Company incurred increased investor relations expenses. Insurance expenses increased $44,000 in 2013 due to increases in the Company directors and officers’ insurance costs. Other selling, general and administrative expenses, net, decreased by $3,000 for the year ended December 31, 2013 compared with the same period in 2012.

 

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 2012. For the year ended December 31, 2012, the Company had a loss from operations of $917,000 compared with a loss from operations of $634,000 for the year ended December 31, 2013, a decrease of $283,000.

 

Discontinued Operations

 

Loss from discontinued operations was $4,509,000 for the year ended December 31, 2012. This loss from discontinued operations relates to the losses of VGE, DMFCC and Ionfinity for the year ended December 31, 2012 as a result of the Company eliminating all ownership interests in the entities during 2012. The decrease is the result of the following components:

 

   December 31, 2012 
Loss on separation and deconsolidation of VGE  $(4,969,000)
Gain on deconsolidation of DMFCC and Ionfinity   511,000 
Discontinued Operations of VGE   (359,000)
Discontinued Operations of DMFCC   311,000 
Discontinued Operations of Ionfinity   (3,000)
      
Total  $4,509,000 

 

Liquidity and Capital Resources

 

The Company’s net loss for the year ended December 31, 2013 was $699,000. Non-cash expenses totaled $518,000 for the year ended December 31, 2013 primarily due to stock options, stock compensation expense, and amortization of debt discount. Changes in operating assets and liabilities used $42,000 of cash in 2013. Net cash used in operating activities for operations was $223,000 for the year ended December 31, 2013.

 

Net cash used in investing was $1,000 related to additions of fixed assets. Net cash provided by financing activities included $207,000 related to loans the Company received from Director Kevin Schewe and $27,000 representing payments on financed insurance.

 

The Company has incurred significant losses from operations, resulting in an accumulated deficit of $49,489,000 at December 31, 2013. 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 that 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 December 31, 2013, the Company had remaining availability under the note of $658,000. 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.

 

17
 

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.

 

Inflation and Seasonality

 

We have not experienced material inflation during the past five years. Seasonality has historically not had a material effect on our operations.

 

Off-Balance Sheet Arrangements

 

The Company does not have any off-balance sheet arrangements as of December 31, 2013.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

This information is not required of smaller reporting companies.

  

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

The financial statements to be provided in this Annual Report on Form 10-K are included following Part IV, Item 15, commencing on page F-1.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

As of December 31, 2013, the Company carried out an assessment under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(1) and I 5d-15(1)). Our CEO and CFO concluded that the Company's disclosure controls and procedures were not effective as of December 31, 2013.

 

Management’s Report on Internal Control Over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company maintains internal controls over financial reporting to include those policies and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission's ("SEC's") rules and forms, and that such information is accumulated and communicated to the Company's management, including its CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

 

In designing and evaluating the internal controls over financial reporting, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

Under the supervision and with the participation of management, including the Company's CEO and CFO, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included an assessment of the design of the Company's internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Based on this evaluation, our CEO and CFO concluded as of December 31, 2013, our internal controls over financial reporting were not effective at the reasonable assurance level due to the material weaknesses discussed below.

 

18
 

In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure that our consolidated financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the consolidated financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

 

This Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Report.

 

Inherent Limitations on the Effectiveness of Controls

 

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.

 

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 

Material Weakness and Related Remediation Initiatives

 

Set forth below is a summary of the various significant deficiencies which caused management to conclude that we had the material weakness identified above. Through the efforts of management, external consultants, and our Audit Committee, we have developed a specific action plan to remediate the material weaknesses. We expect to implement these various action plans during 2014. If we are able to complete these action plans in a timely manner, we anticipate that all control deficiencies and material weaknesses will be remediated by December 31, 2014.

 

Our CEO and CFO concluded that as of December 31, 2013, the following material weaknesses existed:

 

1.           Due to the Company’s budget constraints, the Company’s accounting department does not maintain the number of accounting personnel (either in-house or external) necessary to ensure more complete and effective financial reporting controls.  

 

Remediation of Internal Control Deficiencies and Expenditures

 

It is reasonably possible that, if not remediated, one or more of the material weaknesses described above could result in a material misstatement in our reported financial statements that might result in a material misstatement in a future annual or interim period. We are developing specific action plans for each of the above material weaknesses. We are uncertain at this time of the costs to remediate all of the above listed material weaknesses.

 

Through these steps, we believe that we are addressing the deficiencies that affected our internal control over financial reporting as of December 31, 2013. Because the remedial actions may require hiring of additional personnel, and relying extensively on manual review and approval, the successful operation of these controls for at least several quarters may be required before management may be able to conclude that the material weaknesses have been remediated. We intend to continue to evaluate and strengthen our internal control over financial reporting systems. These efforts require significant time and resources. If we are unable to establish adequate internal control over financial reporting systems, we may encounter difficulties in the audit or review of our financial statements by our independent registered public accounting firm, which in turn may have a material adverse effect on our ability to prepare financial statements in accordance with GAAP and to comply with our Commission reporting obligations.

 

Changes in Internal Control over Financial Reporting

 

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

  

ITEM 9B. OTHER INFORMATION

 

Not applicable.

 

19
 

 

PART III

 

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

  

(a)            Executive Officers

 

The following table sets forth our executive officers, their ages and the positions held by them. The Company’s named executive officers as of December 31, 2013 include the Chief Executive Officer and the Chief Financial Officer. In addition, one additional officer of the Company’s subsidiary VGE is included in accordance with disclosure requirements.

 

Name   Age   Position Held
Dr. Carl Kukkonen   68   Chief Executive Officer and Director
Mr. Stephen Muzi   50   Chief Financial Officer

 

Carl Kukkonen.   Dr. Kukkonen is the Chief Executive Officer and Director of VIASPACE Inc. since 2005. He has been the Chief Executive Officer and Director of VIASPACE Green Energy Inc. since October 2008. He is also the Chief Executive Officer, President, and Director, Direct Methanol Fuel Cell Corporation, a subsidiary of VIASPACE Inc. since 2001. He was the Co-founder and Chief Executive Officer of ViaSpace Technologies LLC (predecessor of VIASPACE Inc.) from 1998 to 2005. Previously, Dr. Kukkonen served as the Director of the Center for Space Microelectronics Technology and Manager of Supercomputing at the Caltech NASA Jet Propulsion Laboratory from 1984 to 1998. From 1977 to 1984, he was the Principal Research Engineer at Ford Motor Company. Dr. Kukkonen has a B.S. in physics from the University of California at Davis and an M.S. and Ph.D. in physics from Cornell University. He was also a Post-doctoral fellow at Purdue University.

 

Stephen Muzi. Mr. Muzi has been the Chief Financial Officer, Treasurer and Secretary of VIASPACE Inc. since June 2005. He has been the Chief Financial Officer, Treasurer and Secretary of VIASPACE Green Energy Inc. since October 2008. He was the controller for SpectraSensors, Inc., a spun-off former subsidiary of VIASPACE from 2003 to 2005. He was also a controller for ViaLogy Corp., a spun-off former subsidiary of VIASPACE Inc. from 2003 to 2005. From 2004 to 2005, he also served as a consultant to Direct Methanol Fuel Cell Corporation and Ionfinity LLC, subsidiaries of VIASPACE Inc. from 2004 to 2005. Mr. Muzi joined ViaSpace Technologies LLC (predecessor of VIASPACE Inc.) in May 2000. Mr. Muzi obtained his B.S. degree from Rochester Institute of Technology and an M.B.A. from the State University of New York at Buffalo. He is a Certified Public Accountant.

 

(b)            Directors

 

The Company’s directors are as follows:

 

Name   Age   Position Held
Dr. Carl Kukkonen   68   Chief Executive Officer and Director
Ms. Angelina Galiteva   47   Director
Dr. Kevin L. Schewe   57   Director
Khurram Irshad   48   Director

  

Carl Kukkonen – See background in Item 9 (a) under Executive Officers

 

Angelina Galiteva. Director Since: April 28, 2006. Committee Memberships of Company: Member of the Compensation Committee, Member of the Corporate Governance and Nominating Committee. Independent Director: Yes. Principal Occupations for the last 5 years: Angelina Galiteva was appointed by California’s Governor Jerry Brown and subsequently approved by the State Senate to the California Independent System Operator Corporation Board of Governors. The Independent System Operator is responsible for the reliable operation of the electrical grid in the state of California and for the efficient integration of the 33% Renewable Portfolio Standard mandate. Ms. Galiteva is also a Principal at NEOptions, Inc., a renewable energy and new technology product design and project development firm. Her industry experience includes serving as Executive Director of the Los Angeles Department of Water and Power and head of its Green LA, Environmental Affairs and New Product Development Organization. While at the municipal utility, she was responsible for strategic positioning and the environmental compliance departments. Her career includes working with the California ISO and Power Exchange on their initial launches and she also worked as a power analyst for the New York Power Authority. Ms. Galiteva works to advance the use of renewable energy and distributed energy technologies worldwide. In the non government organization (NGO) arena, she is the founder of the Renewables 100 Policy Institute and also serves as the Chairperson for the World Council for Renewable Energy. Both organizations are dedicated to the successful deployment of renewable energy technologies and the policies that support them on a global scale. Ms. Galiteva graduated from Pace University School of Law with a Juris Doctor degree and an LL.M. degree in Environmental and Energy Law. She specialized in electric utility strategic policy analysis and decision making focusing on pending industry transition and integration of renewable energy technologies in the utility mix.

 

20
 

Kevin L. Schewe, MD. Director Since: January 19, 2012. Kevin L. Schewe, MD was appointed to the Board of Directors on January 19, 2012 as an independent director. Dr. Schewe is a Board-Certified Radiation Oncologist and a Fellow of the American College of Radiation Oncology since prior to 2007. Dr. Schewe has devoted his 25-year medical career and practice in the fight against cancer. He currently serves as Medical Director of Radiation Oncology at the Red Rocks Medical Center in Golden, Colorado and also at the Thornton Cancer Center Department of Radiation Oncology in Thornton, Colorado. The two cancer centers are co-owned by Dr. Schewe and HealthONE, the Colorado Division of Hospital Corporation of America (HCA) which is the largest private operator of healthcare facilities in the world and listed on the New York Stock Exchange. Dr. Schewe has also developed a premium line of skin care and cosmetic products designed to help naturally heal, protect, repair and subsequently maintain not only the damaged skin of cancer patients, but also individuals who have experienced skin damage resulting from aging, dryness, UV exposure, other illnesses, and environmental pollution. These products are manufactured and sold by Dr. Schewe’s company Elite Therapeutics. Dr. Schewe received his Bachelor of Arts Biology at the University of Missouri and his medical degree at the University of Missouri School of Medicine.

 

Khurram Irshad. Mr. Irshad was appointed to the Board of Directors on August 1, 2013. Since August 2010, Mr. Irshad has headed the consulting firm Amaanco, a company dealing with companies in agribusiness and enabling them to comply with US government regulations on Food safety under FSMA law. His other main emphasis since 2006 has been on developing projects based on renewable energy, primarily biomass. He is also the CEO and founder of Winergy Pakistan (Pvt.) Limited since August 2006. At Winergy, his efforts led to securing the concession to develop the world’s largest biogas plant based on 500,000 dairy animals at Landhi Cattle Colony, Karachi, Pakistan. On December 18, 2013, the Company entered into a Representation in Pakistan and Giant King Grass Supply contract with 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.

 

He is credited for developing a 5 MW power project for Pakistan Navy in 2010-2011 to supply power and water to one of its bases. Mr. Irshad is also the Chairman and founder of Aquatech Infrastructures Limited since January 1996. Founded in 1996, within ten years, Aquatech became a leading water and wastewater treatment company in Pakistan. During this period, he developed the innovative process of recycling and reusing the wastewater of the textile processing industry, and was awarded a patent for his process in 2007. During this time, he was also the advisor on water resource management to Deputy Chairman Planning Commission, Government of Pakistan. He received his MS in Industrial Management from State University of New York at Stony Brook in 1990. He worked in the banking sector and then headed the chemical and commodities division of the Japanese trading company, Itochu (Pakistan) a Fortune 500 company. 

 

Family Relationships

 

There are no family relationships between or among any of the current directors, executive officers or persons nominated or charged by the Company to become directors or executive officers.

 

Involvement in Certain Legal Proceedings

 

None of our directors or executive officers has, during the past five years:

 

  · been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

 

  · had any bankruptcy petition filed by or against any business of which he was a general partner or executive officer, either at the time of the bankruptcy or within two years prior to that time;

 

  · been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, futures, commodities or banking activities; or

 

  · been found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

 

21
 

 

  · been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:.

 

  (i) any federal or state securities or commodities law or regulation;
     
  (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
     
  (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

  · been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. (covering stock, commodities or derivatives exchanges, or other SROs).

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Not applicable.

 

Code of Ethics

 

The Company adopted a code of ethics that applies to its principal: executive officers, financial officer, accounting officer or controller, or persons performing similar functions. The text of the Company’s code of ethics is available on the Company’s website, www.viaspace.com. A copy of the Company’s code of ethics may be obtained free of charge by contacting the Company at the address or telephone number listed on the cover page hereof.

 

Committees of the Board of Directors

 

Audit Committee. On October 20, 2005, our BOD established an Audit Committee. Our Audit Committee has the authority to retain and terminate the services of our independent accountants, reviews annual financial statements, considers matters relating to accounting policy and internal controls and reviews the scope of annual audits. The Company does not currently have an independent member of the BOD serving as the audit committee’s financial expert that meets the definition under Item 401(e) of Regulation S-K. The Audit Committee held no meetings in 2013.

 

Compensation Committee. On October 20, 2005, our BOD established a Compensation Committee. Our Compensation Committee reviews, approves and makes recommendations regarding our compensation policies, practices and procedures to ensure that legal and fiduciary responsibilities of the BOD are carried out and that such policies, practices and procedures contribute to our success. The Compensation Committee is responsible for the determination of the compensation of our chief executive officer, and shall conduct its decision making process with respect to that issue without the chief executive officer present. The Compensation Committee held no meetings in 2013.

 

Governance and Nominating Committee. On October 20, 2005, our BOD established a Governance and Nominating Committee. This committee’s role is to make recommendations to the full BOD as to the size and composition of the BOD and its committees, and to evaluate and make recommendations as to potential candidates. The Governance and Nominating Committee may consider candidates recommended by shareholders as well as from other sources such as other directors or officers, third party search firms or other appropriate sources. For all potential candidates, the Governance and Nominating Committee may consider all factors it deems relevant, such as a candidate’s personal integrity and sound judgment, business and professional skills and experience, independence, knowledge of the industry in which we operate, possible conflicts of interest, diversity, the extent to which the candidate would fill a present need on the BOD, and concern for the long-term interests of the shareholders. In general, persons recommended by shareholders will be considered on the same basis as candidates from other sources. The Governance and Nominating Committee held no meetings in 2013.

 

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ITEM 11. EXECUTIVE COMPENSATION

 

The following table shows the annual compensation paid by us to Dr. Carl Kukkonen, our principal executive officer, for the year ended December 31, 2013 and our executive officers who were paid more than $100,000 per annum. Other than the officers listed, no other officer had total compensation during either of the previous two years of more than $100,000. The Named Executive Officers are the Company’s Chief Executive Officer and Chief Financial Officer.

 

SUMMARY COMPENSATION TABLE

 

(a)  (b)  (c)   (d)   (e)   (f)   (g)   (h) 
Name and Principal Position  Year  Salary
($)
   Bonus
($)
   Stock Awards
($) (3)
   Option Awards
($)(1)
   All Other Compensation
($)(2)
   Total
($)
 
                            
Carl Kukkonen,  2013   161,200            2,187    19,726    183,113 
Chief Executive   2012   60,000        251,903    98,568        410,471 
Officer of Company  2011           604,568    291,416        895,984 
                                  
Stephen J. Muzi,  2013   60,450            1,093    15,018    76,561 
Chief Financial   2012   30,000        150,000    58,027    12,627    250,654 
Officer, Treasurer and Secretary of Company  2011   12,060        360,000    168,152    11,553    551,765 

 

(1) Column (f) represents the dollar amount recognized as compensation expense for financial statement reporting purposes for each year under FASB ASC Topic 718, Share-Based Payment, and not an amount paid to or realized by the Named Executive Officer. Assumptions used in the calculation of this amount are included in the footnotes to the Company’s consolidated audited financial statements. There can be no assurance that the amounts determined by FASB ASC Topic 718 will ever be realized.
(2) Dr. Kukkonen received $5,715 and $13,717 in 2012 and 2011, respectively, for health insurance coverage (equivalent to the cost to the Company if he was covered under the Company’s plan). These amounts were paid as part of Dr. Kukkonen’s stock awards in 2012 and 2011 included in column e. In 2013, Dr. Kukkonen’s health insurance coverage was reimbursed to him directly in cash, which amount is included above in column g. Amounts shown for Mr. Muzi represent health insurance coverage paid by the Company directly to the health insurance provider on his behalf.
(3) 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 December 31, 2013: 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.

 

Narrative Disclosure to Summary Compensation Table

 

Employment Agreements and Arrangements

 

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.

 

23
 

 

Stock Option Grants

 

The following table provides information on stock options granted in 2013 to each of the Company’s Named Executive Officers. There can be no assurance that the Grant Date Fair Value of Stock and Option Awards will ever be realized.

 

VIASPACE INC.

GRANTS OF PLAN-BASED AWARDS

      Estimated Future Payouts Under Non-Equity
Incentive Plan Awards
  Estimated Future Payouts Under Equity Incentive
Plan Awards
               
Name  Grant Date  Threshold ($)  Target ($)  Maximum
($)
  Threshold ($)  Target
($)
  Maximum
($)
  All Other Stock Awards: Number of Shares of Stocks or Units
(#)
  All Other Option Awards: Number of Securities Underlying Options
(#) (1)
   Exercise or Base Price of Option Awards
($/Sh)
   Grant Date Fair Value of Stock and Option Awards
(2)
 
Carl Kukkonen  10/9/13                        2,000,000   $.0141   $26,242 
Stephen Muzi  10/9/13                        1,000,000   $.0141   $13,121 

 

(1) Options allow the grantee to purchase a share of VIASPACE common stock for the fair market value of a share of VIASPACE Common Stock on the grant date. Options above vested immediately. If a grantee’s employment is terminated, options that are then vested expire within three months of termination and unvested options expire immediately.
   
(2) Represents the aggregate FASB ASC Topic 718 values of options granted during the year. There can be no assurance that the options will ever be exercised (in which case no value will be realized by the executive) or that the value on exercise will equal the FASB ASC Topic 718 value.

 

24
 

Outstanding Equity Awards at Fiscal Year End

 

The following table shows the number of equity awards held by the Company’s Named Executive Officers on December 31, 2013.

 

VIASPACE INC.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

DECEMBER 31, 2013

 

OPTION AWARDS   STOCK AWARDS  

Name

(a)

 

Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable

(b)

   

Number of

Securities

Underlying

Unexercised

Options

(#)

Unexercisable

(c)

 

Equity

Incentive

Plan

Awards:

Number

of Securities

 Underlying

Unexercised

Unearned

Options

(#)

(d)

 

Option

Exercise

Price

($)

(e)

 

Option

Expiration

Date

(f)

 

Number of

Shares or

Units of

Stock That

Have Not

Vested

(#)

(g)

 

Market

Value of

Shares or

Units of

Stock That

Have Not

Vested

($)

(h)

 

Equity

Incentive

Plan Awards: Number of Unearned

Shares,

Units or

Other Rights

That Have

Not Vested

(#)

(i)

 

Equity

Incentive

Plan Awards: Market or

Payout

Value of

Unearned

Shares,

Units or

Other Rights

That Have

Not Vested

(#)

(j)

 
Carl Kukkonen     2,000,000           $ 0.0141   10/9/23          
Stephen Muzi     1,000,000           $ 0.0141   10/9/23          
Carl Kukkonen     9,890,111           $ 0.0028   7/30/22          
Stephen Muzi     7,417,580           $ 0.0028   7/30/22          
Carl Kukkonen     20,000,000           $ 0.012   2/12/20          
Stephen Muzi     10,000,000           $ 0.012   2/12/20          
Carl Kukkonen     5,000,000           $ 0.0225   8/19/19          
Stephen Muzi     5,000,000           $ 0.0225   8/19/19          
Stephen Muzi     3,000,000           $ 0.039   2/14/18          
Stephen Muzi     250,000           $ 0.08   12/10/17          

  

There were no shares of the Company’s common stock acquired during 2013 upon the exercise of the options.

 

Director Compensation

 

The following chart summarizes the annual compensation for the Company’s non-employee directors during 2013.

 

Director Compensation

 

(a)  (b)   (c)   (d)   (e)   (f) 
Name  Fees Earned
($)
   Stock Awards
($)
   Option Awards
($) (1)
   All Other
Compensation ($)
   Total
($)
 
Angelina Galiteva          $4,502       $4,502 
Kevin L. Schewe          $5,596       $5,596 
Khurram Irshad          $3,762       $3,762 

 

(1)  Column (d) represents the dollar amount recognized as compensation expense for financial statement reporting purposes for 2013 under FASB ASC Topic 718, and not an amount paid to or realized by the Director. The amount shown includes all awards granted. Assumptions used in the calculation of this amount are included in the Company’s financial statement footnotes. There can be no assurance that the amounts determined by FASB ASC Topic 718 will ever be realized.

 

25
 

Narrative Disclosure to Director Compensation Table

 

Compensation of Non-employee Directors

 

On July 31, 2013, 1,000,000 stock options were granted to Mr. Irshad as a stock award for board of director services. On October 9, 2013, 2,000,000 stock options and 1,000,000 stock options were granted to Dr. Schewe and Ms. Galiteva, respectively, as a stock award for board of director services. The price of the stock options was the closing market price on the date of grant. The stock options for Mr. Irshad vest over one year, and the stock options granted to Dr. Schewe and Ms. Galiteva vest over two years. During 2013, no cash compensation was paid to non-employee directors. Directors of the Company, who are employees of the Company, do not receive additional compensation for their services as Directors.

 

Retirement Plans

 

The Company does not have any retirement plans at December 31, 2013.

  

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

 

The following table sets forth certain information regarding beneficial ownership of our common stock as of March 28, 2014 by (i) each person who beneficially owns more than 5% of all outstanding shares of our common stock, (ii) each director and the executive officer identified below, and (iii) all directors and executive officers as a group. The mailing address for each person identified in this table is 382 N. Lemon Ave., Suite 364, Walnut, California 91789.

  

Name  Number of
Shares Beneficially
Owned
   Exercisable
Options
Beneficially
Owned (a)
   Total Number of
Shares and
Exercisable
Options
Beneficially
Owned
   Percent of
Class of
Common Stock
(b)
 
                 
Directors:                    
Carl Kukkonen, CEO  (c)   45,036,311    35,473,444    80,509,755    5.1% 
Angelina Galiteva   903,764    5,041,667    5,945,431    0.4% 
Kevin L. Schewe, MD   157,432,088    1,583,333    159,015,421    10.1% 
Khurram Irshad       833,333    833,333    0.1% 
                     
Other Named Officers:                    
Stephen J. Muzi, CFO   19,443,694    25,959,247    45,402,941    2.9% 
                     
All Named Executive Officers and Directors as a group (5 persons)   222,815,857    68,891,024    291,706,881    18.6% 
                     
Other 5% Owners:                    
Sung Hsien Chang  (d)   274,422,273        274,422,273    17.4% 
Inter Pacific Arts Corporation (e)   135,691,337        135,691,337    8.6% 

 

(a) Includes only options that become exercisable on or before May 27, 2014 and excludes options that become exercisable after such date.
   
(b) The percent of Common Stock owned is calculated using the sum of the number of shares of Common Stock owned as of March 28, 2014 and the number of options of the beneficial owner that are exercisable on or before May 27, 2014 divided by the sum of the number of shares of Common Stock outstanding as of March 28, 2014 and the number of options of the beneficial owner that are exercisable on or before May 27, 2014.
   
(c) Dr. Kukkonen deferred a portion of his 2009, 2010 and 2011 salary and is entitled to 44,394,324 unregistered shares of Company common stock which is not included in the number of shares beneficially owned since they have not been issued yet.
   
(d) Mr. Chang is a former director of the Company, President of VIASPACE Green Energy Inc. and CEO of IPA BVI and IPA China, all former subsidiaries of the Company. Shares shown include those owned by Mr. Chang directly and shares held by Changs LLC and the Chang Family Foundation. Shares shown do not include those owned by Mr. Chang’s adult children.
   
(e) Inter Pacific Arts Corporation is a former subsidiary of the Company and is controlled by former director Mr. Chang.

 

26
 

Equity Compensation Plans

 

The following table summarizes information about the options and warrants under the Company’s equity plans as of the close of business on December 31, 2013.

 

Equity Compensation Plan Information

 

   Number of
securities
to be issued
upon
exercise of
outstanding
options,
warrants and
rights
(a)
   Weighted-
average
exercise price
of outstanding
options,
warrants
and rights
(b)
   Number of
securities
remaining
available
for future
issuance
under equity
compensation
plans
(excluding
securities
reflected in
column
(a))
(c)
 
Equity compensation plans approved by security holders for VIASPACE   73,407,691   $0.013    24,870,002 
Equity compensation plans not approved by security holders            
Total   73,407,691   $0.013    24,870,002 

 

Our current stock option plans (the “Plans”) are explained in detail in the footnotes to the accompanying consolidated financial statements and provide for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock and other awards to the Company’s employees, officers, directors or consultants.

 

Our BOD, with assistance from the executive officers of the Company, administers the Plans, selects the individuals to whom options will be granted, determines the number of options to be granted, and the term and exercise price of each option. Stock options granted pursuant to the terms of each of the Plans generally cannot be granted with an exercise price of less than 100% of the fair market value on the date of the grant for incentive stock options (110% of the fair market value on the date of the grant for employees that own 10% or more of Company stock). In the case of non-qualified stock options, the exercise price shall not be less than 85% of fair market value on the date of the grant. The term of the options granted under the Plans cannot be greater than 10 years. Options vest at varying rates for employees, directors and consultants.

 

Changes in Control Arrangements

 

No change in control arrangements existed at December 31, 2013.

  

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

 

Other than as listed below, we have not been a party to any significant transactions, proposed transactions, or series of transactions, and in which, to our knowledge, any of our directors, officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons has had or will have a direct or indirect material interest.

 

Due to Dr. Carl Kukkonen

 

Included in the Company’s consolidated balance sheets at December 31, 2013 and December 31, 2012 are Related Party Payables. The Company has a payable of $680,000 at December 31, 2013 and December 31, 2012. Included in the amount 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 December 31, 2013: 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.

 

27
 

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.

 

From January through December 2013, Dr. Schewe made loans of $207,000 to the Company. The Company recorded a discount on the loans of $65,000 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 2013, Dr. Schewe converted loans totaling $207,000 into 20,281,331 common shares of the Company. At the time of the conversions, the company recorded the discount as additional interest expense. As of December 31, 2013, the Company had remaining availability under the note of $658,000.

 

Agreement with Winergy

 

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 has agreed to pay a one-time fee of $5,000 to the Company upon the signing of the contract which has been made. The Company will receive license fees in the future from Winergy when they are able to secure customer relationships who will use the Company's Giant King Grass in their particular application.

 

Director Independence

 

Our BOD has determined that it currently has two members who qualify as "independent" as the term is used in Item 407 of Regulation S-K as promulgated by the SEC and in the listing standards of The Nasdaq Stock Market, Inc. - Marketplace Rule 4200. The independent directors are: Ms. Angelina Galiteva and Dr. Kevin L. Schewe.

  

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

    2013     2012  
Audit Fees – Hein & Associates LLP   $ 59,900     $ 45,000  
Other Fees            
    $ 59,900     $ 45,000  

 

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-audit Services of Independent Auditors

 

Consistent with SEC policies regarding auditor independence, our Audit Committee has the responsibility for appointing, setting compensation and overseeing the work of the independent auditor. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditor.

 

Prior to engagement of the independent auditor for the next year’s audit, management will submit an aggregate of services expected to be rendered during that year for each of four categories of services to the Audit Committee for approval.

 

  1. Audit services include audit work performed in the preparation of financial statements, as well as work that generally only the independent auditor can reasonably be expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards.

 

  2. Audit-Related services are for assurance and related services that are traditionally performed by the independent auditor, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements.

 

28
 

 

  3. Tax services include all services performed by the independent auditor's tax personnel except those services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning, and tax advice.

 

  4. Other Fees are those associated with services not captured in the other categories.

 

Prior to the engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted and the Audit Committee requires the independent auditor and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent auditor for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging the independent auditor.

 

The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.

 

 

PART IV

 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

Exhibit Number   Description of Exhibit
3.1 (i)   Articles of Incorporation of the Company (incorporated herein by reference to Exhibit 1.1 of the Company’s SB-2 Registration Statement filed on November 21, 2003).
3.2 (i)   Amendment to Articles of Incorporation dated August 3, 2005 (incorporated by reference to Item 5.03 of the Company’s Form 8-K filed on August 9, 2005).
3.3 (i)   Amendment to Articles of Incorporation dated May 9, 2005 (incorporated herein by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-QSB for the quarter ended September 30, 2005).
3.4 (i)   Amendment to Articles of Incorporation dated June 1, 2005 (incorporated herein by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-QSB for the quarter ended September 30, 2005).
3.5 (i)   Articles of Merger between Global-Wide Publication Ltd. and ViaSpace Technologies LLC dated June 17, 2005 (incorporated by reference to Exhibit 3.3 of the Company’s Quarterly Report on Form 10-QSB for the quarter ended September 30, 2005).
3.6 (i)   Amendment to Articles of Incorporation dated October 12, 2006 (incorporated herein by reference to Item 5.03 of the Company’s Form 8-K filed October 17, 2006).
3.7 (i)   Amendment to Articles of Incorporation dated December 7, 2007 (incorporated herein by reference to Exhibit 10.3 of the Company’s Form 8-K filed December 13, 2007).
3.8 (i)   Amendment to Articles of Incorporation dated February 14, 2008 (incorporated herein by reference to Exhibit 10.1 of the Company’s Form 8-K filed February 21, 2008).
3.9 (i)   Amendment to Articles of Incorporation dated December 31, 2013 (incorporated herein by reference to Exhibit 10.1 of the Company’s Form 8-K filed January 3, 2014).
3.1 (ii)   Bylaws of the Company (incorporated herein by reference to Exhibit 2.1 of the Company’s SB-2 Registration Statement filed on November 21, 2003).
3.2 (ii)   Amendment to Bylaws of the Company December 7, 2007 (incorporated herein by reference to Exhibit 10.4 of the Company’s Form 8-K filed December 13, 2007).
3.3   Certificate of Designation dated May 14, 2010 (incorporated herein by reference to Exhibit 3.1 of the Company’s Form 8-K filed May 18, 2010).
10.1   VIASPACE Inc. 2005 Stock Incentive Plan dated October 20, 2005 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on October 26, 2005).
10.1A   Amendment to 2005 Stock Incentive Plan dated May 18, 2006 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on May 23, 2006).
10.1B   Amendment to 2005 Stock Incentive Plan dated December 7, 2007 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on December 13, 2007).
10.1C   Amendment to 2005 Stock Incentive Plan dated February 14, 2008 (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed on February 21, 2008).
10.1D   Amendment to 2005 Stock Incentive Plan dated February 14, 2008 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K/A filed on April 4, 2008).
10.2   VIASPACE Inc. 2005 Non-Employee Director Option Plan dated October 20, 2005 (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed on October 26, 2005).

 

29
 

 

Exhibit Number   Description of Exhibit
10.3   VIASPACE Inc. 2006 Non-Employee Director Option Plan dated February 13, 2006 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on February 16, 2006).
10.4   Compensation Package for Outside Members of the Board Directors of VIASPACE Inc. dated October 20, 2005 (incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K filed on October 26, 2005).
10.5   2006 Compensation Package for Outside Members of the Board of Directors of VIASPACE Inc. dated February 13, 2006 (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed on February 16, 2006).
10.6   Service and Support Agreement dated February 28, 2008 between the Company and E2 Corp. (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed March 5, 2008).
10.7   Securities Purchase Agreement dated October 21, 2008 by and among the Registrant, VIASPACE Green Energy Inc., Sung Hsien Chang and China Gate Technology Co. Ltd. (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed October 27, 2008).
10.8   Shareholders Agreement dated October 21, 2008 by and among the Registrant, VIASPACE Green Energy Inc., and Sung Hsien Chang (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed October 27, 2008).
10.9   Amendment to Securities Purchase Agreement dated June 22, 2009 by and among the Registrant, VIASPACE Green Energy Inc., Sung Hsien Chang and China Gate Technology Co., Ltd. (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed June 26, 2009).
10.10   Amendment No. 2 to Securities Purchase Agreement dated August 21, 2009 by and among the Registrant, VIASPACE Green Energy Inc., Sung Hsien Chang and China Gate Technology Co., Ltd. (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed August 25, 2009).
10.11   Amendment No. 3 to Securities Purchase Agreement dated August 21, 2009 by and among the Registrant, VIASPACE Green Energy Inc., Sung Hsien Chang and China Gate Technology Co., Ltd. (incorporated by reference to Exhibit 10.1 of the Company’s Form 10-Q filed November 16, 2009).
10.12   Amendment No. 4 to Securities Purchase Agreement dated November 21, 2009 by and among the Registrant, VIASPACE Green Energy Inc. and Sung Hsien Chang (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed November 23, 2009).
10.13   Amendment No. 5 to Securities Purchase Agreement dated November 25, 2009 by and among the Registrant, VIASPACE Green Energy Inc. and Sung Hsien Chang (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed November 30, 2009).

10.14   Amendment No. 6 to Securities Purchase Agreement dated December 18, 2009 by and among the Registrant, VIASPACE Green Energy Inc. and Sung Hsien Chang (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed December 21, 2009).
10.15   Share Purchase Agreement dated April 16, 2010 by and among the Registrant and Sung Hsien Chang (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed April 20, 2010).
10.16   Amendment to Share Purchase Agreement dated May 14, 2010 by and among Registrant, Sung Chang, certain other VGE shareholders and the other parties set forth therein (incorporated herein by reference to Exhibit 10.1 of the Company’s Form 8-K filed May 18, 2010).
10.17   Security Agreement dated May 14, 2010 by and between the Registrant and Sung Chang (incorporated herein by reference to Exhibit 10.2 of the Company’s Form 8-K filed May 18, 2010).
10.18   Stock Pledge Agreement dated May 14, 2010 by and between the Registrant and Sung Chang (incorporated herein by reference to Exhibit 10.3 of the Company’s Form 8-K filed May 18, 2010).
10.19   Registration Rights Agreement dated May 14, 2010 by and between the Registrant and Chang (incorporated herein by reference to Exhibit 10.6 of the Company’s Form 8-K filed May 18, 2010).
10.20   Secured Promissory Note dated May 14, 2010 by and between Registrant and Chang (incorporated herein by reference to Exhibit 10.7 of the Company’s Form 8-K filed May 18, 2010).
10.20A   Amendment to Secured Promissory Note dated May 16, 2011 by and between Registrant and Chang (incorporated herein by reference to Exhibit 10.1 of the Company’s Form 10-Q filed May 16, 2011).
10.21   Recapitalization Agreement dated September 30, 2012 by and among the Registrant, VIASPACE Green Energy Inc. (“VGE”), Sung Chang, Changs LLC, Carl Kukkonen and Stephen Muzi (incorporated by reference to Exhibit 10.01 of the Company’s Form 8-K filed October 5, 2012).
10.22   Supply License and Commercialization Agreement dated September 30, 2012 by and among the Registrant and VGE (incorporated by reference to Exhibit 10.02 of the Company’s Form 8-K filed October 5, 2012).
10.23   Loan Agreement dated September 30, 2012 by and between the Registrant and Dr. Kevin Schewe (incorporated by reference to Exhibit 10.03 of the Company’s Form 8-K filed October 5, 2012).
10.24   Form of Secured Convertible Note (incorporated by reference to Exhibit 10.04 of the Company’s Form 8-K filed October 5, 2012).
10.25   Security Agreement dated September 30, 2012 by and between the Registrant and Dr. Kevin Schewe (incorporated by reference to Exhibit 10.05 of the Company’s Form 8-K filed October 5, 2012).
10.26   Mutual Limited Release dated September 30, 2012 by and among the Registrant, VGE, Schewe, Kukkonen, Muzi, Chang and the other parties listed therein (incorporated by reference to Exhibit 10.06 of the Company’s Form 8-K filed October 5, 2012).
30
 

 

Exhibit Number   Description of Exhibit
10.27   Lock-up Agreement dated September 30, 2012 by and among VIASPACE and the other parties listed therein (incorporated by reference to Exhibit 10.07 of the Company’s Form 8-K filed October 5, 2012).
10.28   Kukkonen Employment Agreement dated October 10, 2012 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed October 11, 2012).
10.28A   Kukkonen Employment Agreement dated October 9, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed October 11, 2013).
10.29   Muzi Employment Agreement dated October 10, 2012 (incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K filed October 11, 2012).
10.29A   Muzi Employment Agreement dated October 9, 2013 (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed October 11, 2013).
10.30   Kukkonen, Muzi and Galiteva Lock Up Agreement dated October 10, 2012 (incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K filed October 11, 2012).
10.31   Senior Secured Convertible Promissory Note dated October 23, 2012 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed October 23, 2012).
10.32   Senior Secured Convertible Promissory Note dated November 27, 2012 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed November 29, 2012).
10.33   Senior Secured Convertible Promissory Note dated December 31, 2012 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed December 31, 2012).
10.34   Senior Secured Convertible Promissory Note dated January 30, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed January 31, 2013).
10.35   Senior Secured Convertible Promissory Note dated February 25, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed February 25, 2013).
10.36   Senior Secured Convertible Promissory Note dated March 28, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed April 1, 2013).
10.37   Senior Secured Convertible Promissory Note dated April 25, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed April 30, 2013).
10.38   Senior Secured Convertible Promissory Note dated May 29, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed May 31, 2013).
10.39   Senior Secured Convertible Promissory Note dated June 24, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed June 25, 2013).
10.40   Senior Secured Convertible Promissory Note dated July 29, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed July 31, 2013).
10.41   Senior Secured Convertible Promissory Note dated August 28, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed August 29, 2013).
10.42   Senior Secured Convertible Promissory Note dated September 24, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed September 26, 2013).
10.43   Senior Secured Convertible Promissory Note dated October 25, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed October 28, 2013).
14.1   VIASPACE Inc. Code of Ethics for Senior Executive Officers and Senior Financial Officers dated October 20, 2005 (incorporated by reference to Exhibit 14.1 of the Company’s Form 8-K filed on October 26, 2005).
21   * List of subsidiaries of Company.
23.1   * Consent of Hein & Associates LLP dated March 31, 2014.
31.1   * Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14 and 15d-14 as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
31.2   * Certification of President and Chief Financial Officer pursuant to Exchange Act Rule 13a-14 and 15d-14 as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
32   * Certification of the Company’s Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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

  

31
 

 

Signatures

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 31, 2014.

 

  VIASPACE INC.
  (Registrant)
   
By:  /s/ CARL KUKKONEN
  Name: Carl Kukkonen
  Title: Chief Executive Officer
  (Principal Executive Officer and Director)
   
By: /s/ STEPHEN J. MUZI
  Name: Stephen J. Muzi
  Title: Chief Financial Officer
  (Principal Financial and Accounting Officer)

 

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

SIGNATURE   TITLE   DATE
         
/s/ CARL KUKKONEN   Chief Executive Officer   March 31, 2014
Carl Kukkonen   (Principal Executive Officer and Director)    
         
/s/ STEPHEN J. MUZI   Chief Financial Officer   March 31, 2014
Stephen J. Muzi   (Principal Financial and Accounting Officer)    
         
/s/ ANGELINA GALITEVA   Director   March 31, 2014
Angelina Galiteva        
         
/s/ KEVIN L. SCHEWE   Director   March 31, 2014
Kevin L. Schewe        
         
/s/ KHURRAM IRSHAD   Director   March 31, 2014
Khurram Irshad        

 

 

32
 

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

VIASPACE INC.

 

TABLE OF CONTENTS

 

  PAGE
   
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-2
   
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 2013 AND 2012
 
   
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Shareholders’ Deficit F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

F-1
 

 

Report of Independent Registered Public Accounting Firm

 

 

To the Board of Directors and Shareholders

VIASPACE Inc.

 

 

We have audited the accompanying consolidated balance sheets of VIASPACE Inc. as of December 31, 2013 and 2012, and the related consolidated statements of operations, shareholders' equity (deficit), and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. 

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of VIASPACE Inc. as of December 31, 2013 and 2012, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

 

The accompanying financial statements were prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred significant losses from operations, resulting in an accumulated deficit of $49,489,000. The Company expects such losses to continue.  In addition, the Company has limited working capital. These facts raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/S/ HEIN & ASSOCIATES LLP

 

 

HEIN & ASSOCIATES LLP

 

Irvine, California

March 31, 2014

 

F-2
 

 

VIASPACE INC.

CONSOLIDATED BALANCE SHEETS

 

   December 31, 2013   December 31, 2012 
           
ASSETS          
CURRENT ASSETS:          
Cash and equivalents  $6,000   $50,000 
Prepaid expenses   233,000    287,000 
TOTAL CURRENT ASSETS   239,000    337,000 
           
FIXED ASSETS, NET   1,000     
           
OTHER ASSETS:          
Other assets   1,000    1,000 
TOTAL OTHER ASSETS   1,000    1,000 
           
TOTAL ASSETS  $241,000   $338,000 
           
LIABILITIES AND SHAREHOLDERS’ DEFICIT          
CURRENT LIABILITIES:          
Accounts payable  $32,000   $113,000 
Accrued expenses   60,000    46,000 
Unearned revenue   37,000    66,000 
Related party payables   680,000    680,000 
TOTAL CURRENT LIABILITIES   809,000    905,000 
           
COMMITMENTS AND CONTINGENCIES (Note 10)          
           
SHAREHOLDERS’ DEFICIT:          
Preferred stock, $0.001 par value, 10,000,000 shares authorized, one share of Series A preferred stock issued and outstanding in 2013 and 2012        
Common stock, $0.001 par value, 1,800,000,000 shares authorized, 1,489,332,999 and 1,433,366,223 shares issued and outstanding in 2013 and 2012, respectively   1,489,000    1,433,000 
Additional paid in capital   47,432,000    46,790,000 
Accumulated deficit   (49,489,000)   (48,790,000)
Total shareholders’ deficit   (568,000)   (567,000)
           
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT  $241,000   $338,000 

 

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

 

F-3
 

 

VIASPACE INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

  

    Years Ended December 31,  
    2013     2012  
             
REVENUES   $ 105,000     $ 32,000  
COST OF REVENUES     31,000       41,000  
GROSS PROFIT (LOSS)     74,000       (9,000
                 
OPERATING EXPENSES                
Operations     29,000       34,000  
Selling, general and administrative     679,000       874,000  
Total operating expenses     708,000       908,000  
LOSS FROM OPERATIONS     (634,000 )     (917,000 )
                 
OTHER EXPENSE                
Interest expense     (65,000 )     (404,000 )
Total other expense     (65,000 )     (404,000
                 
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES     (699,000 )     (1,321,000 )
Income taxes            
LOSS FROM CONTINUED OPERATIONS BEFORE DISCONTINUED OPERATIONS     (699,000 )     (1,321,000 )
Discontinued Operations:                
Loss from discontinued operations     -       (51,000 )
Loss on disposition of discontinued operations     -       (4,458,000
Total discontinued operations     -       (4,509,000 )
NET LOSS     (699,000 )     (5,830,000 )
Net loss attributed to noncontrolling interests     -       90,000  
NET LOSS ATTRIBUTED TO VIASPACE   $ (699,000 )   $ (5,740,000 )
                 
LOSS PER SHARE OF COMMON STOCK FROM CONTINUING OPERATIONS — Basic and diluted   $ *     $ *  
LOSS PER SHARE OF COMMON STOCK FROM DISCONTINUED OPERATIONS — Basic and diluted   $ *     $ *  
LOSS PER SHARE OF COMMON STOCK FROM NET LOSS ATTRIBUTED TO VIASPACE — Basic and diluted   $ *     $ *  
                 
WEIGHTED AVERAGE SHARES OUTSTANDING—Basic and diluted     1,466,620,587       1,385,168,793  

_______________

*     Less than $0.01 per common share.

 

The accompanying notes are an integral part of the consolidated financial statements. 

 

F-4
 

 

VIASPACE INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

YEARS ENDED DECEMBER 31, 2013 AND 2012

 

    Common Stock     Additional
Paid in
    Accumulated     Total Shareholders’ Equity     Noncontrolling        
    Shares     Amount     Capital     Deficit     (Deficit)     Interest     Total  
                                           
BALANCE, DECEMBER 31, 2011     1,333,796,601     $ 1,334,000     $ 43,653,000     $ (43,050,000 )   $ 1,937,000     $ 917,000     $ 2,854,000  
                                                         
Shares issued for consulting services     19,000,438       19,000       105,000               124,000               124,000  
Shares issued for salaries     48,350,043       48,000       352,000               400,000               400,000  
Beneficial conversion feature of convertible debt                     56,000               56,000               56,000  
Stock issued upon conversion of note payable     32,219,141       32,000       103,000               135,000               135,000  
Non cash compensation related to stock options                     86,000               86,000               86,000  
Non cash compensation related to stock options (VGE)                     84,000               84,000       27,000       111,000  
Cash distribution from Ionfinity                                             (75,000 )     (75,000 )
Foregiveness of debt due to VGE                     2,351,000               2,351,000               2,351,000  
Deconsolidation of VGE                                             (268,000 )     (268,000 )
Deconsolidation of Ionfinity and DMFCC                                             (511,000 )     (511,000 )
Net loss                             (5,740,000 )     (5,740,000 )     (90,000 )     (5,830,000 )
BALANCE, DECEMBER 31, 2012     1,433,366,223     $ 1,433,000     $ 46,790,000     $ (48,790,000 )   $ (567,000 )   $     $ (567,000 )
                                                         
Shares issued for consulting services, net of shares cancelled     35,685,445       36,000       370,000               406,000               406,000  
Beneficial conversion feature of convertible debt                     65,000               65,000               65,000  
Stock issued upon conversion of note payable     20,281,331       20,000       187,000               207,000               207,000  
Non cash compensation related to stock options                     20,000               20,000               20,000  
Net loss                             (699,000 )     (699,000 )           (699,000 )
BALANCE, DECEMBER 31, 2013     1,489,332,999     $ 1,489,000     $ 47,432,000     $ (49,489,000 )   $ (568,000 )   $     $ (568,000 )

 

The accompanying notes are an integral part of the consolidated financial statements.

 

F-5
 

 

VIASPACE INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   Years Ended December 31, 
   2013   2012 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(699,000)  $(5,830,000)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation       79,000 
Amortization of intangible assets       45,000 
Stock option compensation   20,000    197,000 
Stock issued for compensation       400,000 
Stock issued for consulting expense   433,000    124,000 
Amortization of debt discount   65,000    56,000 
Loss on disposal of assets       3,000 
Gain recognized on foregiveness of debt       312,000 
Loss on separation and deconsolidation of VIASPACE Green Energy Inc.       4,969,000 
Gain on deconsolidation of DMFCC and Ionfinity       (511,000)
(Increase) decrease in:          
Accounts receivable       (52,000)
Inventory       (84,000)
Prepaid expenses and other current assets   59,000    (25,000)
Increase (decrease) in:          
Accounts payable   (42,000)   (590,000)
Accrued expenses and other   (30,000)   138,000 
Unearned revenue   (29,000)   66,000 
Related party payable       (52,000)
Net cash used in operating activities   (223,000)   (755,000)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Additions of fixed assets   (1,000)   (92,000)
Additions to land leases       (144,000)
Reduction in cash on deconsolidation of VIASPACE Green Energy       (161,000)
Proceeds from disposal of fixed assets       1,000 
Net cash used in investing activities   (1,000)   (396,000)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Loans from related party   207,000    135,000 
Payments on financed insurance   (27,000)    
Distribution to noncontrolling interests       (75,000)
Net cash provided by financing activities   180,000    60,000 
           
NET DECREASE IN CASH AND EQUIVALENTS   (44,000)   (1,091,000)
CASH AND EQUIVALENTS, Beginning of year   50,000    1,141,000 
CASH AND EQUIVALENTS, End of year  $6,000   $50,000 
           
Supplemental Disclosure of Cash Flow Information:          
Cash paid during the period for:          
Interest  $   $ 
Income taxes  $   $ 

 

Supplemental Disclosure of Non-Cash Activities for 2012:

  · On September 30, 2012, the Company entered into a recapitalization agreement with VIASPACE Green Energy (VGE). On the date of the recapitalization, the Company wrote-off $2,351,000 of debt it owed to VGE and charged this amount to loss on deconsolidation of VGE. Included in amount written off was $1,880,400 representing the fair market value of 1,880,400 newly-issued common shares of VGE that were issued to Changs, LLC as required by the recapitalization agreement. A loss of $4,969,000 was recorded on the separation and deconsolidation of VGE.  
  ·

During 2012, Dr. Schewe converted loans of $135,000 to equity.

·      The Company recorded a discount on loans from Dr. Schewe of $56,000 as a result of a beneficial conversion feature. 

 

Supplemental Disclosure of Non-Cash Activities for 2013:

  · 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.
  ·

The Company recorded a discount on the loans from Dr. Schewe of $65,000 as a result of a beneficial conversion feature.

·       During 2013, Dr Schewe converted loans of $207,000 to equity.

  · The Company issued 3,125,000 shares of the Company’s common stock as payment of $35,000 in accounts payable.
  · 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.
  · The Company financed its annual director and officer insurance premium in the amount of $68,223.

  

 The accompanying notes are an integral part of the consolidated financial statements.

 

F-6
 

 

VIASPACE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 AND 2012

 

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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

 

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.

 

Through September 30, 2012, VIASPACE owned 75.6% of the equity interests of VGE. VGE and its subsidiaries Inter Pacific Arts Corporation (“IPA BVI”) and Guangzhou Inter Pacific Arts (“IPA China”) specialize in the manufacturing of high quality, copyrighted, framed artwork sold in US retail chain stores. In addition, VGE has an exclusive license to Giant King Grass, a proprietary dedicated energy crop for a period described in Note 10. On September 30, 2012, the Company executed agreements to formalize the separation of the Company and VGE and cause the orderly transfer of all of the Company's equity interest in VGE to Changs, LLC, a company controlled by Sung Chang, President of VGE and a former Director of the Company. In addition, agreements have been executed which give VGE the right to commercially develop Giant King Grass in China and Taiwan and give VIASPACE the right to commercially develop Giant King Grass in the world other than China and Taiwan. Since the Company no longer has any equity interest in VGE, the Company can no longer consolidate the operations of VGE into the operations of the Company. The operating results of VGE prior to September 30, 2012 are shown as discontinued operations in the Company’s financial statements.

 

Going Concern – The Company has incurred significant losses from operations, resulting in an accumulated deficit of $49,489,000. The Company expects such losses to continue. However, on September 30, 2012, as discussed in Note 5, 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 the next five years 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 that will be profitable. Accordingly, there continues to be substantial doubt as to the Company’s ability to continue as a going concern. The consolidated financial statements do not include any other adjustments that might result from the outcome of these uncertainties.

 

Basis of Presentation – The accompanying audited consolidated financial statements of the Company were prepared in accordance with United States generally accepted accounting principles (“US GAAP”) for financial information and with Securities and Exchange Commission (“SEC”) instructions to Form 10-K. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All significant intercompany accounts and transactions have been eliminated on consolidation. Certain reclassifications were made to the December 31, 2012 consolidated financial statements to conform to the December 31, 2013 consolidated financial statement presentation.

 

Principles of Consolidation – The Company is generally a major shareholder of its affiliated companies which are consolidated. The Company has no affiliated companies which are consolidated at December 31, 2013. Any affiliated companies in which the Company owns, directly or indirectly, a controlling voting interest, are consolidated. Under this method, an affiliated company’s results of operations are reflected within the Company’s consolidated statement of operations. Transactions between the Company and its consolidated affiliated companies are eliminated in consolidation. The Company adopted “Business Combinations”, codified in FASB ASC Topic 805, which requires use of the purchase method for all business combinations.

 

F-7
 

 

Noncontrolling Interest - The Company follows “Noncontrolling Interests in Consolidated Financial Statements, codified in FASB Accounting Standards Codification (“ASC”) Topic 810 which establishes standards governing the accounting for and reporting of noncontrolling interests (“NCIs”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs (previously referred to as minority interests) be treated as a separate component of equity, not as a liability (as was previously the case); that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions, rather than as step acquisitions or dilution gains or losses; and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. Noncontrolling interest in consolidated subsidiaries is the minority shareholders’ proportionate share of equity of DMFCC and Ionfinity.

 

At January 1, 2012, the Company held ownership positions in VGE, Direct Methanol Fuel Cell Corporation (“DMFCC”) and Ionfinity, LLC (“Ionfinity”). As discussed in Note 2, the Company dissolved DMFCC on November 29, 2012 and sold its ownership position in Ionfinity on December 21, 2012. Additionally, on September 30, 2012, the Company entered into an agreement which resulted in the Company giving up its ownership in VGE. At December 31, 2013 and 2012, the Company had NCI’s to report on its Balance Sheet.

 

Fiscal Year End – The Company’s fiscal year ends December 31.

 

Use of Estimates in the Preparation of the Financial Statements – The preparation of financial statements, in conformity with US GAAP, 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents – The Company considers all highly-liquid investments with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents as of December 31, 2013 or 2012.

 

Income TaxesIncome taxes are accounted for under the asset and liability approach, where deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities, and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

 

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. An uncertain tax position is considered effectively settled on completion of an examination by a taxing authority if certain other conditions are satisfied. Should the Company incur interest and penalties relating to tax uncertainties, such amounts would be classified as a component of interest expense, net and other income (expense), net, respectively.

 

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. During 2013 and 2012, the Company has not recognized revenues under either of these revenue models.

 

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.

 

For the year ending December 31, 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.

 

Major Customers – A relatively small number of customers account for a significant percentage of the Company’s sales. Five customers represented 93% of revenues for the year ending December 31, 2013.

 

F-8
 

 

Stock Based Compensation VIASPACE has a stock-based compensation plan. The Company has adopted the accounting and disclosure provisions of “Share-Based Payments”, codified in FASB ASC Topic 718, using the modified prospective application transition method. 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 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 consolidated balance sheet.

 

Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date.

 

Under the provisions of the Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”), there are three levels of inputs that may be used to measure fair value:

 

Level 1. Quoted prices in active markets for identical assets or liabilities. The Company had no Level 1 assets or liabilities during any period presented.

 

Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. The Company had no Level 2 assets or liabilities during any period presented.

 

Level 3. Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. The Company had no Level 3 assets or liabilities during any period presented.

 

The carrying value of cash and cash equivalents, prepaid expenses, trade payables and accrued expenses, payables to related parties and deferred revenue approximates fair value due to the short period of time to maturity.

 

Net Income (Loss) Per Share The Company computes net loss per share in accordance with “Earnings per Share”, codified in FASB ASC Topic 260. Under the provisions of this topic, basic and diluted net loss per share is computed by dividing the net loss available to common shareholders for the period by the weighted average number of shares of common stock outstanding during the period.

 

Research and Development – The Company did not record any research and development activities in 2013 or 2012. If we do in the future, it will be expensed as incurred.

 

Recent Accounting Standards - There are currently no new accounting pronouncements with a future effective date that are of significance, or potential significance, to us.

 

Subsequent Events – Management evaluates, as of each reporting period, events or transactions that occur after the balance sheet date through the date that the financial statements are issued for either disclosure or adjustment to the consolidated financial results. The Company has evaluated subsequent events up through the date of the filing of this report with the Securities and Exchange Commission. See Note 11.

  

NOTE 2 – DISCONTINUED OPERATIONS

 

DISCONTINUED OPERATIONS – VGE

 

Recapitalization Agreement

 

Through September 30, 2012, VIASPACE owned 75.6% of the equity interests of VGE. Effective September 30, 2012, the Company entered into a Recapitalization Agreement (“Recap Agreement”) with VGE. Pursuant to the Recap Agreement, the Company returned 6,503,920 shares of VGE Common Stock to VGE and VGE issued to Changs, LLC, 8,384,320 shares of VGE common stock, representing an 80% interest in VGE. In exchange for the shares of VGE common stock, Chang forgave the payment of the Secured Note issued to the Company in the amount of $5,131,000 plus accrued interest of $626,000. The Company and Chang agreed that if the Company was to receive an amount from Chang pursuant to a future claim, the Company could not collect unless the amount exceeded $5,640,000. In addition, the Company has agreed to pay up to $40,000, in legal fees and costs in connection with the negotiation and preparation of the Recap Agreement and other related documents.

 

F-9
 

 

Loss on Discontinued Operations

 

Effective September 30, 2012, VIASPACE no longer owns any equity interests in VGE and as a result, the operations of VGE were deconsolidated. As of September 30, 2012, we deconsolidated $9,349,000 of assets and $705,000 of liabilities from our consolidated balance sheet. In addition, we eliminated debt and accrued interest in the amount of $5,757,000 and recognized expense of $1,880,000 relating to the value of the additional stock issued by VGE as part of the transaction, resulting in loss of $5,087,000. This loss as well as the revenues and expenses of VGE are included in Discontinued Operations. The Company has historically reported the operations of VGE in the framed-art operating segment.

 

DISCONTINUED OPERATIONS – DMFCC

 

As of December 31, 2011, the Company owned 71.4% of the outstanding shares of DMFCC. DMFCC was an inactive subsidiary that previously produced disposable fuel cartridges that provided the energy source for portable electronics powered by fuel cells. On October 31, 2012, DMFCC entered into an Acknowledgment and Mutual Release Agreement with the University of Southern California (USC) and California Institute of Technology (Caltech) whereby DFMCC agreed to terminate the license agreements it had in place with USC and Caltech in exchange for Caltech and USC agreeing to forgive any royalties, patent legal fees, or other amounts now due and owing from DMFCC under such license agreements. DMFCC has no further obligations under the license agreements as of October 31, 2012 and no longer has rights under the license agreements with USC and Caltech. As of September 30, 2012, DMFCC had accounts payable to USC of approximately $307,000 which was included in the Company’s consolidate balance sheets. This amount was reversed on October 31, 2012 and is included in discontinued operations on the Company’s consolidated statement of operations at December 31, 2012. Since DMFCC had no remaining operations or assets remaining, DMFCC was formally dissolved on November 29, 2012.

 

DISCONTINUED OPERATIONS – Ionfinity

 

At December 31, 2011, the Company owned 46.3% of the outstanding membership interests of Ionfinity. Ionfinity was an inactive subsidiary that previously had US government contracts for a next-generation mass spectrometry technology for industrial process control and environmental monitoring. On October 16, 2012, the Board of Directors of the Company approved a resolution to divest its ownership interests in Ionfinity. On December 31, 2012, the Company divested of its interest in Ionfinity and transferred its membership interests to the largest existing member of Ionfinity LLC. The Company has no remaining interests or obligations in Ionfinity.

 

The revenues and expenses of discontinued operations for year ended December 31, 2012 for VGE, DMFCC and Ionfinity were as follows:

 

   VGE   DMFCC   Ionfinity   Total 
                     
REVENUES  $2,505,000   $   $   $2,505,000 
COST OF REVENUES   1,733,000            1,733,000 
GROSS PROFIT   772,000            772,000 
                     
OPERATING EXPENSES                    
Operations   133,000            133,000 
Selling, general and administrative   1,175,000        3,000    1,178,000 
Total operating expenses   1,308,000        3,000    1,311,000 
                     
LOSS FROM OPERATIONS   (536,000)       (3,000)   (539,000)
                     
OTHER INCOME (EXPENSE)                    
Other expense   (3,000)           (3,000)
Other income   180,000    311,000        491,000 
Total other income   177,000    311,000        488,000 
                     
INCOME (LOSS) BEFORE INCOME TAXES   (359,000)   311,000    (3,000)   (51,000)
Income taxes                
                     
NET INCOME (LOSS)  $(359,000)  $311,000   $(3,000)  $(51,000)

 

F-10
 

 

Land use rights amortization included in discontinued operations was $27,000 for the year ended December 31, 2012.

 

License to grass amortization included in discontinued operations was $18,000 for the year ended December 31, 2012.

 

Rent expense included in discontinued operations for the year ended December 31, 2012 was $24,000.

 

In connection with the Recap Agreement, all parties involved including CEO Dr. Carl Kukkonen, CFO Stephen Muzi, Director Kevin Schewe and Former Director Sung Chang executed a Mutual and Limited Release Agreement, pursuant to which each of the parties released each other from any future claims that may have against the other party. Pursuant to this agreement, the amount that the Company owed to VGE at September 30, 2012, of $2,351,000 was forgiven. As such, the Company wrote the related payable off, which was accounted for as a capital contribution from VGE.

 

NOTE 3 – 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 December 31, 2013 and December 31, 2012, the remaining value of these agreements was $182,000 and $245,000, respectively, which is included in prepaid expenses in the accompanying consolidated 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. The Company issued 24,000,000 unregistered shares of the Company’s common stock with a value of $281,000 in advance of the payments made by the provider. As of December 31, 2013 and 2012, included in prepaid expenses is $161,000 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 were $51,000 and $42,000 at December 31, 2013 and 2012, respectively.

 

NOTE 4 – STOCK OPTIONS, WARRANTS AND ISSUED STOCKS

 

VIASPACE Inc. 2005 Stock Incentive Plan

 

On October 20, 2005, the BOD of the Company adopted the 2005 Stock Incentive Plan (the “Plan”) including the 2005 Non-Employee Director Option Program (the “2005 Director Plan”). The Plan was also approved by the holders of a majority of the Company’s common stock. The Plan originally provided for issuance of up to 28,000,000 shares of the Company’s common stock. On July 12, 2006, the Company filed a Form S-8 Registration Statement with the SEC registering 28,000,000 shares of the Company’s common stock. On February 14, 2008, the BOD and the holders of a majority of the Company’s common stock approved an amendment to the Plan which increased the maximum aggregate number of shares which may be issued in the Plan to 99,000,000 shares. On April 30, 2008, the Company filed a Registration Statement on Form S-8 registering 71,000,000 shares of the Company’s common stock. In addition, effective January 1, 2009 and each January 1 thereafter during the term of the Plan, the maximum number of shares under the Plan are to be increased so that the maximum number of shares is equivalent 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. On February 4, 2009, the Company filed a Registration Statement on Form S-8 registering 146,500,000 shares of the Company’s common stock based on the number of shares of common stock outstanding on December 31, 2008.

 

The Plan is designed to provide additional incentive to employees, directors and consultants of the Company through awarding incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock and other awards. On February 13, 2006, the BOD approved the 2006 Non-Employee Director Option Program (the “2006 Director Plan”) replacing the 2005 Director Plan and the 2006 Director Plan was approved by the holders of a majority of the Company’s common stock. The 2006 Director Plan awards a one-time grant of 125,000 options, or such other number of options as determined by the BOD as plan administrator of the 2006 Director Plan, to newly appointed outside members of the Company’s BOD and annual grants of 50,000 options, or such other number of options as determined by the BOD, to outside members of the BOD that have served at least nine months.

 

The Company’s BOD administers the Plan, selects the individuals to whom options will be granted, determines the number of options to be granted, and the term and exercise price of each option. Stock options granted pursuant to the terms of the Plans generally cannot be granted with an exercise price of less than 100% of the fair market value on the grant date. The term of the options granted under the Plan cannot be greater than 10 years. Options to employees and directors generally vest over four years but the actual length of the vesting term is determined by the BOD. At December 31, 2013, there were 24,870,002 shares available for future grant.

 

During 2013, the Company granted 7,000,000 stock options to directors and employees to purchase common shares. During 2013, 1,000,000 stock options were cancelled due to consultants terminating employment or service with the Company.

 

FASB ASC Topic 718 requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors based on estimated fair values using the modified prospective transition method. FASB ASC Topic requires companies to estimate the fair value of share-based payment awards to employees and directors on the date of grant using an option pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite services periods on a straight-line basis in the Company’s Consolidated Statements of Operations.

 

F-11
 

 

The Company adopted the detailed method provided in FASB ASC Topic for calculating the beginning balance of the additional paid-in capital pool (“APIC pool”) related to the tax effects of employee stock-based compensation, and to determine the subsequent impact on the APIC pool and Consolidated Statements of Cash Flows of the income tax effects of employee stock-based compensation awards that are outstanding upon the adoption of FASB ASC Topic.

 

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. For stock options issued to employees, directors, consultants and advisory board members for 2013 and 2012, the fair value was estimated at the date of grant using the following range of assumptions: 

 

    2013     2012  
Risk free interest rate     2.00% - 2.06%       0.99% - 1.40%  
Dividends     0%       0%  
Volatility factor     134.81% - 138.17%       124.48% - 134.79%  
Expected life     6.67 years       6.67 years  
Annual forfeiture rate     0%       34.4% - 35.2%  

 

Employee and Director Option Grants

 

The following table summarizes activity for employees and directors in the Company’s Plan at December 31, 2013:

 

   

Number of

Shares

   

Weighted-

Average

Exercise

Price Per

Share

   

Weighted-

Average

Remaining

Contractual

Term In Years

   

Aggregate

Intrinsic

Value

 
Outstanding at December 31, 2012     67,408,000     $ 0.0131              
Granted     7,000,000       0.0135              
Exercised                        
Forfeited     (1,000,000 )     0.0076              
Outstanding at December 31, 2013     73,408,000     $ 0.0132       6.77     $ 235,000  
Exercisable at December 31, 2013     66,283,000     $ 0.0132       6.59     $ 230,000  

  

The weighted-average grant date fair value of stock options granted during 2013 and 2012 was $0.0135 and $0.004 per share, respectively. The Plan recorded $20,000 and $86,000 of compensation expense for employee and director stock options for the years ending December 31, 2013 and 2012, respectively. At December 31, 2013, there was $78,000 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 and 9 months. For the years ending December 31, 2013 and 2012, the fair value of options vested for employees and directors was $875,000 and $800,000, respectively. There were no options exercised during 2013.

 

NOTE 5 – 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 2, 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.

 

F-12
 

 

From January through December 2013, Dr. Schewe made loans of $207,000 to the Company. The Company recorded a discount on the loans of $65,000 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 2013, Dr. Schewe converted loans totaling $207,000 into 20,281,331 common shares of the Company. At the time of the conversions, the company recorded the discount as additional interest expense. As of December 31, 2013, the Company had remaining availability under the note of $658,000.

 

NOTE 6 – SHAREHOLDERS’ EQUITY (DEFICIT)

 

Preferred Stock

 

At December 31, 2013 and 2012, the number of authorized shares of the Company’s preferred stock was 10,000,000. The par value of the preferred stock is $0.001.

 

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. 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, effectively giving him a controlling interest in VIASPACE.

 

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 2) 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.

 

At December 31, 2013 and December 31, 2012, there is one share of Series A Preferred Stock outstanding.

 

Common Stock

 

As of December 31, 2013, the number of authorized shares of the Company’s common stock was 1,800,000,000. On December 31, 2013, a majority of the common stockholders of the Company and the Board of Directors of the Company voted to amend the Company's Articles of Incorporation and increase the number of shares of authorized common stock from 1,500,000,000 to 1,800,000,000 shares. The par value of the common stock is $0.001. Common shareholders are entitled to one vote for each share held on all matters voted on by shareholders.

 

As of December 31, 2012, there were 1,433,366,223 shares of common stock outstanding. During 2013, the Company issued 9,125,000 shares of common stock under an existing Registration Statement on Form S-8 to employees and consultants for services provided or to be provided to the Company. In addition, the Company issued 28,232,686 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 $456,000 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. During 2013, 1,672,241 shares of common stock were returned by a vendor to the Company and cancelled. During 2013, the Company issued 20,281,331 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 5. As of December 31, 2013, there were 1,489,332,999 shares of common stock outstanding.

 

NOTE 7 – INCOME TAX

 

The Company did not record a provision for income taxes for 2013 or 2012 as a result of operating losses. The Company recorded valuation allowances to fully reserve its deferred tax assets, as management believes it is more likely than not that these assets will not be realized. The valuation allowance decreased by approximately $5,140,000 for the year ended December 31, 2013 and increased by $394,000 for the year ended December 31, 2012. It is possible that management’s estimates as to the likelihood of realization of its deferred tax assets could change as a result of changes in estimated operating results. Should management conclude that it is more likely than not that these deferred tax assets are, at least in part, realizable, the valuation allowance will be reduced and recognized as a deferred income tax benefit in the statement of operations in the period of change.

 

F-13
 

 

The Company has Federal net operating loss carryovers of approximately $18,836,000 available at December 31, 2013 and State net operating loss carryovers of approximately $18,755,000 available at December 31, 2013, which expire through 2033. Additionally, the Company has capital loss carryforwards of approximately $13,231,000 available at December 31, 2013, which expire through 2017. Due to the uncertainty surrounding the realization of the capital loss carryforwards in future tax returns, the tax effect of the capital loss carryfowards is not recognized in the income tax provision.

 

FASB ASC 740 also addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. During the years ended December 31, 2013 and 2012, the Company did not recognize any tax liabilities related to uncertain tax positions and does not have a balance for such liabilities as of December 31, 2013.

 

The Company recognizes accrued interest and penalties, if any, associated with uncertain tax positions as part of the income tax provision. There was no accrued interest or penalties associated with uncertain tax positions recognized in the Company’s balance sheets as of December 31, 2013 and 2012. The Company is subject to income tax in the United States federal jurisdiction and various state jurisdictions and has identified its federal tax return and tax returns in state jurisdictions below as “major” tax filings. These jurisdictions, along with the years still open to audit under the applicable statutes of limitation, are as follows:

 

Jurisdiction   Tax Years
Federal   2010 - 2012
California   2010 - 2012

 

The following table reconciles the US statutory rates to the Company’s effective tax rate for 2013 and 2012.

 

    2013     2012  
U.S Statutory rates     34.0%       34.0%  
State taxes, net of Federal benefit     5.8%       5.7%  
Permanent differences     (0.1% )     (0.4% )
Change in Valuation allowance     (39.7% )     (39.3% )
Other            
Effective income tax rate     0.0%       0.0%  

 

The following are the components of the Company’s deferred tax assets and liabilities at December 31, 2013 and 2012:

 

    2013     2012  
Deferred Tax Assets:                
Net operating loss carryforwards   $ 7,499,000     $ 10,183,000  
Stock compensation expense     4,002,000       3,995,000  
Intangibles           2,176,000  
Related party interest           287,000  
Total Deferred Tax Assets     11,501,000       16,641,000  
Less: Valuation allowance     (11,501,000 )     (16,641,000 )
                 
Net Deferred Tax Assets   $     $  

 

NOTE 8 – 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.

 

F-14
 

 

The following table sets forth common stock equivalents (potential common stock) at December 31, 2013 and 2012 that are not included in the loss per share calculation since their effect would be anti-dilutive for the periods indicated:

  

    2013     2012  
Stock Options     73,408,000       67,408,000  
                 

The following table sets forth the computation of basic and diluted net loss per share for 2012 and 2012, respectively:

 

    2013     2012  
Basic and diluted net loss per share:            
Numerator:            
Net loss attributable to common stock   $ (699,000 )   $ (5,740,000 )
Denominator:                
Weighted average shares of common stock outstanding     1,466,620,587       1,385,168,793  
                 
Net loss per share of common stock, basic and diluted   $ *     $ *  

_______________

*  Less than $0.01

 

NOTE 9 – RELATED PARTY TRANSACTIONS

 

Included in the Company’s consolidated balance sheets at December 31, 2013 and December 31, 2012 are Related Party Payables. The Company has a payable of $680,000 at December 31, 2013 and December 31, 2012. Included in the amount 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 December 31, 2013: 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 has agreed to pay VGE $40,000 as reimbursement for legal fees and costs in connection with the separation of the Company and VGE. This amount is due by September 30, 2014.

 

The Company has a loan agreement with Director Dr. Kevin Schewe which is described in Note 5.

 

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 has agreed to pay a one-time fee of $5,000 to the Company upon the signing of the contract. The Company will receive license fees in the future from Winergy when they are able to secure customer relationships who will use the Company's Giant King Grass in their particular application.

 

NOTE 10 – 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 year ended December 31, 2013 and December 31, 2012, was $10,000 and $12,000, 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.

 

F-15
 

 

All of our collaborative agreements are subject to termination by either party, without significant financial penalty to them. 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 years ending December 31, 2013 and 2012, the Company received $71,000 and $72,000, 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 $105,000 and $5,000 for the years ending December 31, 2013 and 2012, respectively.

 

License Agreement

 

Effective of as 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, VISPACE needs to achieve the milestones in the first two year period:

 

  · 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 expects to meet the milestones by September 30, 2014 and renew the license for an additional two year term. However, there can be no assurance that the Company will meet the milestones prior to the renewal date.

 

There are additional milestones that need to be met as a condition to renew the license for subsequent two year periods, in order for VIASPACE to maintain the license.

 

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 11 – SUBSEQUENT EVENTS

 

On January 6, 2014, the Company issued 10,000,000 unregistered shares of the Company’s common stock with a value of $120,000 to a third party who pays certain expenses of the Company on behalf of the Company.

 

On January 24, 2014, the Company issued 73,846 unregistered shares of the Company’s common stock with a value of $960 for consulting services.

 

On January 29, 2014, Kevin Schewe, advanced an additional $12,000 pursuant to the convertible loan agreement and immediately converted the $12,000 loan into 1,188,119 shares of Company common stock at a conversion price of $0.0101 per common share.

 

On February 26, 2014, Kevin Schewe, advanced an additional $17,000 pursuant to the convertible loan agreement and immediately converted the $17,000 loan into 1,954,023 shares of Company common stock at a conversion price of $0.0087 per common share.

 

On March 19, 2014, Kevin Schewe, advanced an additional $17,000 pursuant to the convertible loan agreement and immediately converted the $17,000 loan into 1,789,474 shares of Company common stock at a conversion price of $0.0095 per common share.

 

F-16

 

EX-21 2 viaspace_10k-ex021.htm LISTING OF SUBSIDIARIES

Exhibit 21

 

Listing of Subsidiaries

The Company has no subsidiaries at December 31, 2013.

 

 

EX-23.1 3 viaspace_10k-ex2301.htm CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Exhibit 23.1

 

Consent of Independent Registered Public Accounting Firm





To the Board of Directors

VIASPACE Inc.

 

We consent to the incorporation by reference of Registration Statement (No. 333-135723, 333-150553 and 333-157102) on Form S-8 of VIASPACE Inc. of our report dated March 31, 2014, relating to our audits of the consolidated financial statements, which appear in this Annual Report on Form 10-K of VIASPACE Inc. for the year ended December 31, 2013. Our report dated March 31, 2014, relating to the consolidated financial statements includes an emphasis paragraph relating to an uncertainty as to the Company's ability to continue as a going concern.

 

/s/ Hein & Associates LLP

 

Hein & Associates LLP

Irvine, California

March 31, 2014

 

EX-31.1 4 viaspace_10k-ex3101.htm CERTIFICATION

Exhibit 31.1

 

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Carl Kukkonen, certify that:

 

1.I have reviewed this Annual Report on Form 10-K 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 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 principles;

 

c)Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report my 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 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 control 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: March 31, 2014 /s/ Carl Kukkonen    
  Carl Kukkonen   
  President and Chief Executive Officer   

 

EX-31.2 5 viaspace_10k-ex3102.htm CERTIFICATION

Exhibit 31.2

 

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Stephen J. Muzi, certify that:

 

1.I have reviewed this Annual Report on Form 10-K 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 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 principles;

 

c)Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report my 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 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 control 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: March 31, 2014 /s/ Stephen J. Muzi    
  Stephen J. Muzi   
  Chief Financial Officer   

EX-32 6 viaspace_10k-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 Annual Report of the Company on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission (the “10-K Report”) that:

 

 

 

(1)

 

 

the 10-K 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-K Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

         
     
Date: March 31, 2014 /s/ Carl Kukkonen  
  Carl Kukkonen   
  Chief Executive Officer   
 
     
Date: March 31, 2014 /s/ Stephen J. Muzi    
  Stephen J. Muzi   
  Chief Financial Officer   

 

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Gain on deconsolidation of DMFCC and Ionfinity (Increase) decrease in: Accounts receivable Inventory Prepaid expenses and other current assets Increase (decrease) in: Accounts payable Accrued expenses and other Unearned revenue Related party payable Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Additions to fixed assets Additions to land leases Reduction in cash on deconsolidation of VIASPACE Green Energy Proceeds from disposal of fixed assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Loans from related party Payments on financed insurance Distribution to noncontrolling interests Net cash provided by financing activities NET DECREASE IN CASH AND EQUIVALENTS CASH AND CASH EQUIVALENTS, Beginning of year CASH AND CASH EQUIVALENTS, End of year Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest Income taxes Summary Of Significant Accounting Policies 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Discontinued Operations and Disposal Groups [Abstract] 2. DISCONTINUED OPERATIONS Prepaid Expenses 3. PREPAID EXPENSES Disclosure of Compensation Related Costs, Share-based Payments [Abstract] Stock options, warrants and issued stocks Debt Disclosure [Abstract] 5. SHORT-TERM AND LONG-TERM DEBT Equity [Abstract] 7. SHAREHOLDERS' EQUITY (DEFICIT) Income Tax Disclosure [Abstract] 7. INCOME TAX Earnings Per Share [Abstract] 8. NET LOSS PER SHARE Related Party Transactions [Abstract] 9. RELATED PARTY TRANSACTIONS Commitments and Contingencies Disclosure [Abstract] 10. OTHER COMMITMENTS AND CONTINGENCIES Subsequent Events [Abstract] 11. SUBSEQUENT EVENTS Summary Of Significant Accounting Policies Policies Description of Business Going Concern Basis of Presentation Principles of Consolidation Noncontrolling Interest Fiscal Year End Use of Estimates in the Preparation of the Financial Statements Cash and cash equivalents Income Taxes Revenue Recognition Major Customers Stock Based Compensation Fair Value of Financial Instruments Net Income (Loss) Per Share Research and Development Recent Accounting Standards Subsequent Events Security Discontinued operations information Fair value assumptions Employee and Director Option Grants US statutory rates Deferred tax assets and liabilities Common Stock Equivalents Not Included in Loss per Share Computation of basic and diluted net loss per share REVENUES COST OF REVENUES GROSS PROFIT Operations Selling, general and administrative Total operating expenses LOSS FROM OPERATIONS Other expenses Other income Total other income INCOME (LOSS) BEFORE INCOME TAXES Income taxes NET LOSS Amortization of land use rights Amortization of license to grass Rent expense Risk free interest rate, minimum Risk free interest rate, maximum Dividends Volatility factor, minimum Volatility factor, maximum Expected life Annual forfeiture rate Option Indexed to Issuer's Equity [Axis] Number of Options Outstanding, Beginning Number of Options Granted Number of Options Exercised Number of Options Forfeited Number of Options Outstanding, Ending Number of Options Exercisable Weighted Average Exercise Price Outstanding, Beginning Weighted Average Exercise Price Granted Weighted Average Exercise Price Exercised Weighted Average Exercise Price Forfeited Weighted Average Exercise Price Outstanding, Ending Weighted Average Exercise Price Exercisable Weighted Average Remaining Contractual Life (in years) Outstanding Weighted Average Remaining Contractual Life (in years) Exercisable Aggregate Intrinsic Value, Outstanding Aggregate Intrinsic Value, Exercisable Note payable U.S Statutory rates State taxes, net of Federal benefit Permanent differences Change in Valuation allowance Other Effective income tax rate Deferred Tax Assets: Net operating loss carryforwards Stock compensation expense Intangibles Related party interest Total Deferred Tax Assets Less: Valuation allowance Net Deferred Tax Assets Federal net operating loss carryover State net operating loss carryover Operating loss expiration date Antidilutive shares excluded from EPS Basic and diluted net loss per share: Numerator : Net loss attributable to common stock Denominator Weighted average shares of common stock outstanding Net loss per share of common stock, basic and diluted Revenue recognized under collaborative agreements Annual forfeiture rate Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Denominator Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Number of Options Exercised Custom Element. Custom Element. Custom Element. Custom Element. Non cash compensation related to stock options (VGE) Deconsolidation of Ionfinity and DMFCC Payments on financed insurance Amount of total operating expenses attributable to the disposal group, including a component of the entity (discontinued operation), during the reporting period. Amount of total other income attributable to disposal group. State net operating loss carryover Revenue recognized under collaborative agreements Discontinued Operations [Member] DocumentDocumentAndEntityInformationAbstract Assets, Current Other Assets, Noncurrent Assets Liabilities, Current Stockholders' Equity Attributable to Parent Liabilities and Equity Gross Profit Operating Costs and Expenses Operating Income (Loss) Interest Expense Nonoperating Income (Expense) Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest Net Income (Loss) Attributable to Noncontrolling Interest Shares, Outstanding Stock Issued During Period, Value, Share-based Compensation, Net of Forfeitures Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property Gains (Losses) on Extinguishment of Debt Deconsolidation, Gain (Loss), Amount Increase (Decrease) in Accounts Receivable Increase (Decrease) in Inventories Increase (Decrease) in Prepaid Expense and Other Assets Increase (Decrease) in Accounts Payable Increase (Decrease) in Deferred Revenue Net Cash Provided by (Used in) Operating Activities, Continuing Operations Payments to Acquire Property, Plant, and Equipment Payments to Acquire Land Held-for-use Cash Divested from Deconsolidation Net Cash Provided by (Used in) Investing Activities, Continuing Operations PaymentsOnFinancedInsurance Net Cash Provided by (Used in) Financing Activities, Continuing Operations Cash and Cash Equivalents, Period Increase (Decrease) Income Taxes Paid, Net Consolidation, Subsidiaries or Other Investments, Consolidated Entities, Policy [Policy Text Block] DiscontinuedOperationsTablesAbstract Disposal Group, Including Discontinued Operation, Revenue Disposal Group, Including Discontinued Operation, Costs of Goods Sold Disposal Group, Including Discontinued Operation, Operating Expense Disposal Group, Including Discontinued Operation, General and Administrative Expense Discontinued Operation, Tax Effect of Income (Loss) from Discontinued Operation During Phase-out Period Discontinued Operation, Income (Loss) from Discontinued Operation During Phase-out Period, Net of Tax Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number NumberOfOptionsExercised Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures and Expirations in Period Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Aggregate Intrinsic Value Deferred Tax Assets, Valuation Allowance EX-101.PRE 12 vspc-20131231_pre.xml XBRL PRESENTATION FILE EXCEL 13 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XML 14 R33.htm IDEA: XBRL DOCUMENT v2.4.0.8
8. NET LOSS PER SHARE (Details-Computation diluted loss) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Basic and diluted net loss per share:    
Numerator : Net loss attributable to common stock $ (699,000) $ (5,740,000)
Denominator    
Weighted average shares of common stock outstanding 1,466,620,587 1,385,168,793
Net loss per share of common stock, basic and diluted $ 0.00 [1] $ 0.00 [1]
[1] Less than $0.01
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3. PREPAID EXPENSES (Details Narrative) (USD $)
Dec. 31, 2013
Dec. 31, 2012
Prepaid expenses $ 233,000 $ 287,000
Future Services
   
Prepaid expenses 182,000 245,000
Other prepaid expenses
   
Prepaid expenses $ 51,000 $ 42,000

XML 18 R9.htm IDEA: XBRL DOCUMENT v2.4.0.8
3. PREPAID EXPENSES
12 Months Ended
Dec. 31, 2013
Prepaid Expenses  
3. 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. 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. The Company issued 24,000,000 unregistered shares of the Company’s common stock with a value of $281,000 in advance of the payments made by the provider. As of December 31, 2013 and 2012, included in prepaid services is $161,000 and $114,000, respectively for shares of stock issued to the provider in excess of amounts paid on the Company’s behalf. At December 31, 2013 and December 31, 2012, the remaining value of these agreements was $182,000 and $245,000, respectively, which is included in prepaid expenses in the accompanying consolidated balance sheets.

 

Other prepaid expenses were $51,000 and $42,000 at December 31, 2013 and 2012, respectively.

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7. INCOME TAX (Details-Effective rate)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Income Tax Disclosure [Abstract]    
U.S Statutory rates 34.00% 34.00%
State taxes, net of Federal benefit 5.80% 5.70%
Permanent differences (0.10%) (0.40%)
Change in Valuation allowance (39.70%) (39.30%)
Other 0.00% 0.00%
Effective income tax rate 0.00% 0.00%
XML 21 R28.htm IDEA: XBRL DOCUMENT v2.4.0.8
5. SHORT-TERM AND LONG-TERM DEBT (Details Narrative) (USD $)
Dec. 31, 2013
Debt Disclosure [Abstract]  
Note payable $ 658,000
XML 22 R30.htm IDEA: XBRL DOCUMENT v2.4.0.8
7. INCOME TAX (Details-Deferred tax assets) (USD $)
Dec. 31, 2013
Dec. 31, 2012
Deferred Tax Assets:    
Net operating loss carryforwards $ 7,499,000 $ 10,183,000
Stock compensation expense 4,002,000 3,995,000
Intangibles 0 2,176,000
Related party interest 0 287,000
Total Deferred Tax Assets 11,501,000 16,641,000
Less: Valuation allowance (11,501,000) (16,641,000)
Net Deferred Tax Assets $ 0 $ 0
XML 23 R31.htm IDEA: XBRL DOCUMENT v2.4.0.8
7. INCOME TAX (Details Narrative) (USD $)
12 Months Ended
Dec. 31, 2013
Income Tax Disclosure [Abstract]  
Federal net operating loss carryover $ 18,836,000
State net operating loss carryover $ 18,755,000
Operating loss expiration date Dec. 31, 2033
XML 24 R8.htm IDEA: XBRL DOCUMENT v2.4.0.8
2. DISCONTINUED OPERATIONS
12 Months Ended
Dec. 31, 2013
Discontinued operations:  
2. DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS – VGE

 

Recapitalization Agreement

 

Through September 30, 2012, VIASPACE owned 75.6% of the equity interests of VGE. Effective September 30, 2012, the Company entered into a Recapitalization Agreement (“Recap Agreement”) with VGE. Pursuant to the Recap Agreement, the Company returned 6,503,920 shares of VGE Common Stock to VGE and VGE issued to Changs, LLC, 8,384,320 shares of VGE common stock, representing an 80% interest in VGE. In exchange for the shares of VGE common stock, Chang forgave the payment of the Secured Note issued to the Company in the amount of $5,131,000 plus accrued interest of $626,000. The Company and Chang agreed that if the Company was to receive an amount from Chang pursuant to a future claim, the Company could not collect unless the amount exceeded $5,640,000. In addition, the Company has agreed to pay up to $40,000, in legal fees and costs in connection with the negotiation and preparation of the Recap Agreement and other related documents.

  

Loss on Discontinued Operations

 

Effective September 30, 2012, VIASPACE no longer owns any equity interests in VGE and as a result, the operations of VGE were deconsolidated. As of September 30, 2012, we deconsolidated $9,349,000 of assets and $705,000 of liabilities from our consolidated balance sheet. In addition, we eliminated debt and accrued interest in the amount of $5,757,000 and recognized expense of $1,880,000 relating to the value of the additional stock issued by VGE as part of the transaction, resulting in loss of $5,087,000. This loss as well as the revenues and expenses of VGE are included in Discontinued Operations. The Company has historically reported the operations of VGE in the framed-art operating segment.

 

DISCONTINUED OPERATIONS – DMFCC

 

As of December 31, 2011, the Company owned 71.4% of the outstanding shares of DMFCC. DMFCC was an inactive subsidiary that previously produced disposable fuel cartridges that provided the energy source for portable electronics powered by fuel cells. On October 31, 2012, DMFCC entered into an Acknowledgment and Mutual Release Agreement with the University of Southern California (USC) and California Institute of Technology (Caltech) whereby DFMCC agreed to terminate the license agreements it had in place with USC and Caltech in exchange for Caltech and USC agreeing to forgive any royalties, patent legal fees, or other amounts now due and owing from DMFCC under such license agreements. DMFCC has no further obligations under the license agreements as of October 31, 2012 and no longer has rights under the license agreements with USC and Caltech. As of September 30, 2012, DMFCC had accounts payable to USC of approximately $307,000 which was included in the Company’s consolidate balance sheets. This amount was reversed on October 31, 2012 and is included in discontinued operations on the Company’s consolidated statement of operations at December 31, 2012. Since DMFCC had no remaining operations or assets remaining, DMFCC was formally dissolved on November 29, 2012.

 

DISCONTINUED OPERATIONS – Ionfinity

 

At December 31, 2011, the Company owned 46.3% of the outstanding membership interests of Ionfinity. Ionfinity was an inactive subsidiary that previously had US government contracts for a next-generation mass spectrometry technology for industrial process control and environmental monitoring. On October 16, 2012, the Board of Directors of the Company approved a resolution to divest its ownership interests in Ionfinity. On December 31, 2012, the Company divested of its interest in Ionfinity and transferred its membership interests to the largest existing member of Ionfinity LLC. The Company has no remaining interests or obligations in Ionfinity.

 

The revenues and expenses of discontinued operations for year ended December 31, 2012 for VGE, DMFCC and Ionfinity were as follows:

 

   VGE   DMFCC   Ionfinity   Total 
                     
REVENUES  $2,505,000   $   $   $2,505,000 
COST OF REVENUES   1,733,000            1,733,000 
GROSS PROFIT   772,000            772,000 
                     
OPERATING EXPENSES                    
Operations   133,000            133,000 
Selling, general and administrative   1,175,000        3,000    1,178,000 
Total operating expenses   1,308,000        3,000    1,311,000 
                     
LOSS FROM OPERATIONS   (536,000)       (3,000)   (539,000)
                     
OTHER INCOME (EXPENSE)                    
Other expense   (3,000)           (3,000)
Other income   180,000    311,000        491,000 
Total other income   177,000    311,000        488,000 
                     
INCOME (LOSS) BEFORE INCOME TAXES   (359,000)   311,000    (3,000)   (51,000)
Income taxes                
                     
NET INCOME (LOSS)  $(359,000)  $311,000   $(3,000)  $(51,000)

  

Land use rights amortization included in discontinued operations was $27,000 for the year ended December 31, 2012.

 

License to grass amortization included in discontinued operations was $18,000 for the year ended December 31, 2012.

 

Rent expense included in discontinued operations for the year ended December 31, 2012 was $24,000.

 

In connection with the Recap Agreement, all parties involved including CEO Dr. Carl Kukkonen, CFO Stephen Muzi, Director Kevin Schewe and Former Director Sung Chang executed a Mutual and Limited Release Agreement, pursuant to which each of the parties released each other from any future claims that may have against the other party. Pursuant to this agreement, the amount that the Company owed to VGE at September 30, 2012, of $2,351,000 was forgiven. As such, the Company wrote the related payable off, which was accounted for as a capital contribution from VGE.

XML 25 R32.htm IDEA: XBRL DOCUMENT v2.4.0.8
8. NET LOSS PER SHARE (Details-Antidilutive shares) (Stock Options)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Stock Options
   
Antidilutive shares excluded from EPS 73,408,000 67,408,000
XML 26 R2.htm IDEA: XBRL DOCUMENT v2.4.0.8
CONSOLIDATED BALANCE SHEETS (USD $)
Dec. 31, 2013
Dec. 31, 2012
CURRENT ASSETS:    
Cash and equivalents $ 6,000 $ 50,000
Prepaid expenses 233,000 287,000
TOTAL CURRENT ASSETS 239,000 337,000
FIXED ASSETS, NET 1,000 0
Other assets 1,000 1,000
TOTAL OTHER ASSETS 1,000 1,000
TOTAL ASSETS 241,000 338,000
LIABILITIES AND SHAREHOLDERS' DEFICIT    
Accounts payable 32,000 113,000
Accrued expenses 60,000 46,000
Unearned revenue 37,000 66,000
Related party payables 680,000 680,000
TOTAL CURRENT LIABILITIES 809,000 905,000
COMMITMENTS AND CONTINGENCIES      
STOCKHOLDERS' DEFICIT:    
Preferred stock, $0.001 par value, 10,000,000 shares authorized, one share of Series A preferred stock issued and outstanding in 2013 and 2012 0 0
Common stock, $0.001 par value, 1,800,000,000 shares authorized, 1,489,332,999 and 1,433,366,223 shares issued and outstanding in 2013 and 2012, respectively 1,489,000 1,433,000
Additional paid in capital 47,432,000 46,790,000
Accumulated deficit (49,489,000) (48,790,000)
Total stockholders' deficit (568,000) (567,000)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 241,000 $ 338,000
XML 27 R6.htm IDEA: XBRL DOCUMENT v2.4.0.8
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (699,000) $ (5,830,000)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation 0 79,000
Amortization of intangible assets 0 45,000
Stock option compensation 20,000 197,000
Stock issued for compensation 0 400,000
Stock issued for consulting expense 433,000 124,000
Amortization of debt discount 65,000 56,000
Loss on disposal of assets 0 3,000
Gain recognized on foregiveness of debt 0 312,000
Loss on separation and deconsolidation of VIASPACE Green Energy Inc. 0 4,969,000
Gain on deconsolidation of DMFCC and Ionfinity 0 (511,000)
(Increase) decrease in:    
Accounts receivable 0 (52,000)
Inventory 0 (84,000)
Prepaid expenses and other current assets 59,000 (25,000)
Increase (decrease) in:    
Accounts payable (42,000) (590,000)
Accrued expenses and other (30,000) 138,000
Unearned revenue (29,000) 66,000
Related party payable 0 (52,000)
Net cash used in operating activities (223,000) (755,000)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Additions to fixed assets (1,000) (92,000)
Additions to land leases 0 (144,000)
Reduction in cash on deconsolidation of VIASPACE Green Energy 0 (161,000)
Proceeds from disposal of fixed assets 0 1,000
Net cash used in investing activities (1,000) (396,000)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Loans from related party 207,000 135,000
Payments on financed insurance (27,000) 0
Distribution to noncontrolling interests 0 (75,000)
Net cash provided by financing activities 180,000 60,000
NET DECREASE IN CASH AND EQUIVALENTS (44,000) (1,091,000)
CASH AND CASH EQUIVALENTS, Beginning of year 50,000 1,141,000
CASH AND CASH EQUIVALENTS, End of year 6,000 50,000
Cash paid during the period for:    
Interest 0 0
Income taxes $ 0 $ 0
XML 28 R22.htm IDEA: XBRL DOCUMENT v2.4.0.8
8. NET LOSS PER SHARE (Tables)
12 Months Ended
Dec. 31, 2013
Earnings Per Share [Abstract]  
Common Stock Equivalents Not Included in Loss per Share
    2013     2012  
Stock Options     73,408,000       67,408,000  
                 
Computation of basic and diluted net loss per share

    2013     2012  
Basic and diluted net loss per share:            
Numerator:            
Net loss attributable to common stock   $ (699,000 )   $ (5,740,000 )
Denominator:                
Weighted average shares of common stock outstanding     1,466,620,587       1,385,168,793  
                 
Net loss per share of common stock, basic and diluted   $ *     $ *  

_______________

*  Less than $0.01

 

XML 29 R24.htm IDEA: XBRL DOCUMENT v2.4.0.8
2. DISCONTINUED OPERATIONS (Details Narrative) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Amortization of license to grass $ 0 $ 45,000
Rent expense 10,000 12,000
Discontinued Operations
   
Amortization of land use rights   27,000
Amortization of license to grass   18,000
Rent expense   $ 24,000
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
12 Months Ended
Dec. 31, 2013
Summary Of Significant Accounting Policies  
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

 

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.

 

Through September 30, 2012, VIASPACE owned 75.6% of the equity interests of VGE. VGE and its subsidiaries Inter Pacific Arts Corporation (“IPA BVI”) and Guangzhou Inter Pacific Arts (“IPA China”) specialize in the manufacturing of high quality, copyrighted, framed artwork sold in US retail chain stores. In addition, VGE has an exclusive license to Giant King Grass, a proprietary dedicated energy crop for a period described in Note 10. On September 30, 2012, the Company executed agreements to formalize the separation of the Company and VGE and cause the orderly transfer of all of the Company's equity interest in VGE to Changs, LLC, a company controlled by Sung Chang, President of VGE and a former Director of the Company. In addition, agreements have been executed which give VGE the right to commercially develop Giant King Grass in China and Taiwan and give VIASPACE the right to commercially develop Giant King Grass in the world other than China and Taiwan. Since the Company no longer has any equity interest in VGE, the Company can no longer consolidate the operations of VGE into the operations of the Company. The operating results of VGE prior to September 30, 2012 are shown as discontinued operations in the Company’s financial statements.

 

Going Concern – The Company has incurred significant losses from operations, resulting in an accumulated deficit of $49,489,000. The Company expects such losses to continue. However, on September 30, 2012, as discussed in Note 5, 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 the next five years 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 that will be profitable. Accordingly, there continues to be substantial doubt as to the Company’s ability to continue as a going concern. The consolidated financial statements do not include any other adjustments that might result from the outcome of these uncertainties.

 

Basis of Presentation – The accompanying audited consolidated financial statements of the Company were prepared in accordance with United States generally accepted accounting principles (“US GAAP”) for financial information and with Securities and Exchange Commission (“SEC”) instructions to Form 10-K. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All significant intercompany accounts and transactions have been eliminated on consolidation. Certain reclassifications were made to the December 31, 2012 consolidated financial statements to conform to the December 31, 2013 consolidated financial statement presentation.

 

Principles of Consolidation – The Company is generally a major shareholder of its affiliated companies which are consolidated. The Company has no affiliated companies which are consolidated at December 31, 2013. Any affiliated companies in which the Company owns, directly or indirectly, a controlling voting interest, are consolidated. Under this method, an affiliated company’s results of operations are reflected within the Company’s consolidated statement of operations. Transactions between the Company and its consolidated affiliated companies are eliminated in consolidation. The Company adopted “Business Combinations”, codified in FASB ASC Topic 805, which requires use of the purchase method for all business combinations.

  

Noncontrolling Interest - The Company follows “Noncontrolling Interests in Consolidated Financial Statements, codified in FASB Accounting Standards Codification (“ASC”) Topic 810 which establishes standards governing the accounting for and reporting of noncontrolling interests (“NCIs”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs (previously referred to as minority interests) be treated as a separate component of equity, not as a liability (as was previously the case); that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions, rather than as step acquisitions or dilution gains or losses; and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. Noncontrolling interest in consolidated subsidiaries is the minority shareholders’ proportionate share of equity of DMFCC and Ionfinity.

 

At January 1, 2012, the Company held ownership positions in VGE, Direct Methanol Fuel Cell Corporation (“DMFCC”) and Ionfinity, LLC (“Ionfinity”). As discussed in Note 2, the Company dissolved DMFCC on November 29, 2012 and sold its ownership position in Ionfinity on December 21, 2012. Additionally, on September 30, 2012, the Company entered into an agreement which resulted in the Company giving up its ownership in VGE. At December 31, 2013 and 2012, the Company had NCI’s to report on its Balance Sheet.

 

Fiscal Year End – The Company’s fiscal year ends December 31.

 

Use of Estimates in the Preparation of the Financial Statements – The preparation of financial statements, in conformity with US GAAP, 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents – The Company considers all highly-liquid investments with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents as of December 31, 2013 or 2012.

 

Income TaxesIncome taxes are accounted for under the asset and liability approach, where deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities, and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

 

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. An uncertain tax position is considered effectively settled on completion of an examination by a taxing authority if certain other conditions are satisfied. Should the Company incur interest and penalties relating to tax uncertainties, such amounts would be classified as a component of interest expense, net and other income (expense), net, respectively.

 

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. During 2013 and 2012, the Company has not recognized revenues under either of these revenue models.

 

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.

 

For the year ending December 31, 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.

 

Major Customers A relatively small number of customers account for a significant percentage of the Company’s sales. Five customers represented 93% of revenues for the year ending December 31, 2013.

  

Stock Based Compensation VIASPACE has a stock-based compensation plan. The Company has adopted the accounting and disclosure provisions of “Share-Based Payments”, codified in FASB ASC Topic 718, using the modified prospective application transition method. 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 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 consolidated balance sheet.

 

Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date.

 

Under the provisions of the Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”), there are three levels of inputs that may be used to measure fair value:

 

Level 1. Quoted prices in active markets for identical assets or liabilities. The Company had no Level 1 assets or liabilities during any period presented.

 

Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. The Company had no Level 2 assets or liabilities during any period presented.

 

Level 3. Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. The Company had no Level 3 assets or liabilities during any period presented.

 

The carrying value of cash and cash equivalents, prepaid expenses, trade payables and accrued expenses, payables to related parties and deferred revenue approximates fair value due to the short period of time to maturity.

 

Net Income (Loss) Per Share The Company computes net loss per share in accordance with “Earnings per Share”, codified in FASB ASC Topic 260. Under the provisions of this topic, basic and diluted net loss per share is computed by dividing the net loss available to common shareholders for the period by the weighted average number of shares of common stock outstanding during the period.

 

Research and Development – The Company did not record any research and development activities in 2013 or 2012. If we do in the future, it will be expensed as incurred.

 

Recent Accounting Standards - There are currently no new accounting pronouncements with a future effective date that are of significance, or potential significance, to us.

 

Subsequent Events – Management evaluates, as of each reporting period, events or transactions that occur after the balance sheet date through the date that the financial statements are issued for either disclosure or adjustment to the consolidated financial results. The Company has evaluated subsequent events up through the date of the filing of this report with the Securities and Exchange Commission. See Note 11.

XML 32 R3.htm IDEA: XBRL DOCUMENT v2.4.0.8
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Dec. 31, 2013
Dec. 31, 2012
STOCKHOLDERS' EQUITY (DEFICIT):    
Preferred stock par value (in Dollars per share) $ 0.001 $ 0.001
Preferred stock shares authorized 10,000,000 10,000,000
Preferred stock, Series A shares issued 1 1
Preferred stock, Series A shares outstanding 1 1
Common stock par value (in Dollars per share) $ 0.001 $ 0.001
Common stock shares authorized 18,000,000 1,500,000,000
Common stock, shares issued 1,489,332,999 1,433,366,223
Common stock, shares outstanding 1,489,332,999 1,433,366,223
XML 33 R17.htm IDEA: XBRL DOCUMENT v2.4.0.8
11. SUBSEQUENT EVENTS
12 Months Ended
Dec. 31, 2013
Subsequent Events [Abstract]  
11. SUBSEQUENT EVENTS

On January 29, 2014, Kevin Schewe, advanced an additional $12,000 pursuant to the convertible loan agreement and immediately converted the $12,000 loan into 1,188,119 shares of Company common stock at a conversion price of $0.0101 per common share.

 

On February 26, 2014, Kevin Schewe, advanced an additional $17,000 pursuant to the convertible loan agreement and immediately converted the $17,000 loan into 1,954,023 shares of Company common stock at a conversion price of $0.0087 per common share.

 

On March 19, 2014, Kevin Schewe, advanced an additional $17,000 pursuant to the convertible loan agreement and immediately converted the $17,000 loan into 1,789,474 shares of Company common stock at a conversion price of $0.0095 per common share.

 

XML 34 R1.htm IDEA: XBRL DOCUMENT v2.4.0.8
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2013
Mar. 28, 2014
Jun. 30, 2013
DocumentDocumentAndEntityInformationAbstract      
Entity Registrant Name VIASPACE Inc.    
Entity Central Index Key 0001270200    
Document Type 10-K    
Document Period End Date Dec. 31, 2013    
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 Public Float     $ 10,235,783
Entity Common Stock, Shares Outstanding   1,504,338,461  
Document Fiscal Period Focus FY    
Document Fiscal Year Focus 2013    
XML 35 R18.htm IDEA: XBRL DOCUMENT v2.4.0.8
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
12 Months Ended
Dec. 31, 2013
Summary Of Significant Accounting Policies Policies  
Description of Business

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

 

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.

 

Through September 30, 2012, VIASPACE owned 75.6% of the equity interests of VGE. VGE and its subsidiaries Inter Pacific Arts Corporation (“IPA BVI”) and Guangzhou Inter Pacific Arts (“IPA China”) specialize in the manufacturing of high quality, copyrighted, framed artwork sold in US retail chain stores. In addition, VGE has an exclusive license to Giant King Grass, a proprietary dedicated energy crop for a period described in Note 10. On September 30, 2012, the Company executed agreements to formalize the separation of the Company and VGE and cause the orderly transfer of all of the Company's equity interest in VGE to Changs, LLC, a company controlled by Sung Chang, President of VGE and a former Director of the Company. In addition, agreements have been executed which give VGE the right to commercially develop Giant King Grass in China and Taiwan and give VIASPACE the right to commercially develop Giant King Grass in the world other than China and Taiwan. Since the Company no longer has any equity interest in VGE, the Company can no longer consolidate the operations of VGE into the operations of the Company. The operating results of VGE prior to September 30, 2012 are shown as discontinued operations in the Company’s financial statements.

Going Concern

Going Concern – The Company has incurred significant losses from operations, resulting in an accumulated deficit of $49,489,000. The Company expects such losses to continue. However, on September 30, 2012, as discussed in Note 5, 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 the next five years 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 that will be profitable. Accordingly, there continues to be substantial doubt as to the Company’s ability to continue as a going concern. The consolidated 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 audited consolidated financial statements of the Company were prepared in accordance with United States generally accepted accounting principles (“US GAAP”) for financial information and with Securities and Exchange Commission (“SEC”) instructions to Form 10-K. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All significant intercompany accounts and transactions have been eliminated on consolidation. Certain reclassifications were made to the December 31, 2012 consolidated financial statements to conform to the December 31, 2013 consolidated financial statement presentation.

Principles of Consolidation

Principles of Consolidation – The Company is generally a major shareholder of its affiliated companies which are consolidated. The Company has no affiliated companies which are consolidated at December 31, 2013. Any affiliated companies in which the Company owns, directly or indirectly, a controlling voting interest, are consolidated. Under this method, an affiliated company’s results of operations are reflected within the Company’s consolidated statement of operations. Transactions between the Company and its consolidated affiliated companies are eliminated in consolidation. The Company adopted “Business Combinations”, codified in FASB ASC Topic 805, which requires use of the purchase method for all business combinations.

Noncontrolling Interest

Noncontrolling Interest - The Company follows “Noncontrolling Interests in Consolidated Financial Statements, codified in FASB Accounting Standards Codification (“ASC”) Topic 810 which establishes standards governing the accounting for and reporting of noncontrolling interests (“NCIs”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs (previously referred to as minority interests) be treated as a separate component of equity, not as a liability (as was previously the case); that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions, rather than as step acquisitions or dilution gains or losses; and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. Noncontrolling interest in consolidated subsidiaries is the minority shareholders’ proportionate share of equity of DMFCC and Ionfinity.

 

At January 1, 2012, the Company held ownership positions in VGE, Direct Methanol Fuel Cell Corporation (“DMFCC”) and Ionfinity, LLC (“Ionfinity”). As discussed in Note 2, the Company dissolved DMFCC on November 29, 2012 and sold its ownership position in Ionfinity on December 21, 2012. Additionally, on September 30, 2012, the Company entered into an agreement which resulted in the Company giving up its ownership in VGE. At December 31, 2013 and 2012, the Company had NCI’s to report on its Balance Sheet.

Fiscal Year End

Fiscal Year End – The Company’s fiscal year ends December 31.

 

Use of Estimates in the Preparation of the Financial Statements

Use of Estimates in the Preparation of the Financial Statements – The preparation of financial statements, in conformity with US GAAP, 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash and cash equivalents

Cash and Cash Equivalents – The Company considers all highly-liquid investments with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents as of December 31, 2013 or 2012.

Income Taxes

Income TaxesIncome taxes are accounted for under the asset and liability approach, where deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities, and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

 

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. An uncertain tax position is considered effectively settled on completion of an examination by a taxing authority if certain other conditions are satisfied. Should the Company incur interest and penalties relating to tax uncertainties, such amounts would be classified as a component of interest expense, net and other income (expense), net, respectively.

Revenue Recognition

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. During 2013 and 2012, the Company has not recognized revenues under either of these revenue models.

 

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.

 

For the year ending December 31, 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.

Major Customers

Major Customers A relatively small number of customers account for a significant percentage of the Company’s sales. Five customers represented 93% of revenues for the year ending December 31, 2013.

Stock Based Compensation

Stock Based Compensation VIASPACE has a stock-based compensation plan. The Company has adopted the accounting and disclosure provisions of “Share-Based Payments”, codified in FASB ASC Topic 718, using the modified prospective application transition method. 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 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 consolidated balance sheet.

Fair Value of Financial Instruments

Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date.

 

Under the provisions of the Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”), there are three levels of inputs that may be used to measure fair value:

 

Level 1. Quoted prices in active markets for identical assets or liabilities. The Company had no Level 1 assets or liabilities during any period presented.

 

Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. The Company had no Level 2 assets or liabilities during any period presented.

 

Level 3. Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. The Company had no Level 3 assets or liabilities during any period presented.

 

The carrying value of cash and cash equivalents, prepaid expenses, trade payables and accrued expenses, payables to related parties and deferred revenue approximates fair value due to the short period of time to maturity.

Net Income (Loss) Per Share

Net Income (Loss) Per Share The Company computes net loss per share in accordance with “Earnings per Share”, codified in FASB ASC Topic 260. Under the provisions of this topic, basic and diluted net loss per share is computed by dividing the net loss available to common shareholders for the period by the weighted average number of shares of common stock outstanding during the period.

Research and Development

Research and Development – The Company did not record any research and development activities in 2013 or 2012. If we do in the future, it will be expensed as incurred.

Recent Accounting Standards

Recent Accounting Standards - There are currently no new accounting pronouncements with a future effective date that are of significance, or potential significance, to us.

Subsequent Events

Subsequent Events – Management evaluates, as of each reporting period, events or transactions that occur after the balance sheet date through the date that the financial statements are issued for either disclosure or adjustment to the consolidated financial results. The Company has evaluated subsequent events up through the date of the filing of this report with the Securities and Exchange Commission. See Note 11.

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Income Statement [Abstract]    
REVENUES $ 105,000 $ 32,000
COST OF REVENUES 31,000 41,000
GROSS PROFIT (LOSS) 74,000 (9,000)
OPERATING EXPENSES    
Operations 29,000 34,000
Selling, general and administrative 679,000 874,000
Total operating expenses 708,000 908,000
LOSS FROM OPERATIONS (634,000) (917,000)
OTHER INCOME (EXPENSE)    
Interest expense (65,000) (404,000)
Total other expense (65,000) (404,000)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (699,000) (1,321,000)
Income taxes 0 0
LOSS FROM CONTINUING OPERATIONS BEFORE DISCONTINUED OPERATIONS (699,000) (1,321,000)
Discontinued operations:    
Loss from discontinued operations 0 (51,000)
Loss on disposition of discontinued operations 0 (4,458,000)
Total discontinued operations 0 (4,509,000)
NET LOSS (699,000) (5,830,000)
Net loss attributed to noncontrolling interests 0 90,000
NET LOSS ATTRIBUTED TO VIASPACE $ (699,000) $ (5,740,000)
LOSS PER SHARE OF COMMON STOCK FROM CONTINUING OPERATIONS - Basic and diluted      
LOSS PER SHARE OF COMMON STOCK FROM DISCONTINUED OPERATIONS - Basic and diluted      
LOSS PER SHARE OF COMMON STOCK FROM NET LOSS ATTRIBUTED TO VIASPACE - Basic and diluted $ 0.00 [1] $ 0.00 [1]
WEIGHTED AVERAGE SHARES OUTSTANDING - Basic and diluted 1,466,620,587 1,385,168,793
[1] Less than $0.01
XML 37 R12.htm IDEA: XBRL DOCUMENT v2.4.0.8
6. SHAREHOLDERS' EQUITY (DEFICIT)
12 Months Ended
Dec. 31, 2013
Equity [Abstract]  
7. SHAREHOLDERS' EQUITY (DEFICIT)

Preferred Stock

 

At December 31, 2013 and 2012, the number of authorized shares of the Company’s preferred stock was 10,000,000. The par value of the preferred stock is $0.001.

 

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. 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, effectively giving him a controlling interest in VIASPACE.

 

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 2) 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.

 

At December 31, 2013 and December 31, 2012, there is one share of Series A Preferred Stock outstanding.

 

Common Stock

 

As of December 31, 2013, the number of authorized shares of the Company’s common stock was 1,800,000,000. On December 31, 2013, a majority of the common stockholders of the Company and the Board of Directors of the Company voted to amend the Company's Articles of Incorporation and increase the number of shares of authorized common stock from 1,500,000,000 to 1,800,000,000 shares. The par value of the common stock is $0.001. Common shareholders are entitled to one vote for each share held on all matters voted on by shareholders.

 

As of December 31, 2012, there were 1,433,366,223 shares of common stock outstanding. During 2013, the Company issued 9,125,000 shares of common stock under an existing Registration Statement on Form S-8 to employees and consultants for services provided or to be provided to the Company. In addition, the Company issued 28,232,686 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 $456,000 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. During 2013, 1,672,241 shares of common stock were returned by a vendor to the Company and cancelled. During 2013, the Company issued 20,281,331 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 5. As of December 31, 2013, there were 1,489,332,999 shares of common stock outstanding.

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5. SHORT-TERM AND LONG-TERM DEBT
12 Months Ended
Dec. 31, 2013
Debt Disclosure [Abstract]  
5. 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 2, 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 through December 2013, Dr. Schewe made loans of $207,000 to the Company. The Company recorded a discount on the loans of $65,000 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 2013, Dr. Schewe converted loans totaling $207,000 into 20,281,331 common shares of the Company. At the time of the conversions, the company recorded the discount as additional interest expense. As of December 31, 2013, the Company had remaining availability under the note of $658,000.

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2. DISCONTINUED OPERATIONS (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
OTHER INCOME (EXPENSE)    
INCOME (LOSS) BEFORE INCOME TAXES $ 0 $ (51,000)
VGE [Member]
   
REVENUES   2,505,000
COST OF REVENUES   1,733,000
GROSS PROFIT   772,000
OPERATING EXPENSES    
Operations   133,000
Selling, general and administrative   1,175,000
Total operating expenses   1,308,000
LOSS FROM OPERATIONS   (536,000)
OTHER INCOME (EXPENSE)    
Other expenses   (3,000)
Other income   180,000
Total other income   177,000
INCOME (LOSS) BEFORE INCOME TAXES   (359,000)
Income taxes   0
NET LOSS   (359,000)
DMFCC [Member]
   
REVENUES   0
COST OF REVENUES   0
GROSS PROFIT   0
OPERATING EXPENSES    
Selling, general and administrative   0
Total operating expenses   0
LOSS FROM OPERATIONS   0
OTHER INCOME (EXPENSE)    
Other expenses   0
Other income   311,000
Total other income   311,000
INCOME (LOSS) BEFORE INCOME TAXES   311,000
Income taxes   0
NET LOSS   311,000
Ionfinity LLC
   
REVENUES   0
COST OF REVENUES   0
GROSS PROFIT   0
OPERATING EXPENSES    
Operations   0
Selling, general and administrative   3,000
Total operating expenses   3,000
LOSS FROM OPERATIONS   (3,000)
OTHER INCOME (EXPENSE)    
Other expenses   0
Other income   0
Total other income   0
INCOME (LOSS) BEFORE INCOME TAXES   (3,000)
Income taxes   0
NET LOSS   (3,000)
Discontinued Operations
   
REVENUES   2,505,000
COST OF REVENUES   1,733,000
GROSS PROFIT   772,000
OPERATING EXPENSES    
Operations   133,000
Selling, general and administrative   1,178,000
Total operating expenses   1,311,000
LOSS FROM OPERATIONS   (539,000)
OTHER INCOME (EXPENSE)    
Other expenses   (3,000)
Other income   491,000
Total other income   488,000
INCOME (LOSS) BEFORE INCOME TAXES   (51,000)
Income taxes   0
NET LOSS   $ (51,000)
XML 40 R19.htm IDEA: XBRL DOCUMENT v2.4.0.8
2. DISCONTINUED OPERATIONS (Tables)
12 Months Ended
Dec. 31, 2013
DiscontinuedOperationsTablesAbstract  
Discontinued operations information
   VGE   DMFCC   Ionfinity   Total 
                     
REVENUES  $2,505,000   $   $   $2,505,000 
COST OF REVENUES   1,733,000            1,733,000 
GROSS PROFIT   772,000            772,000 
                     
OPERATING EXPENSES                    
Operations   133,000            133,000 
Selling, general and administrative   1,175,000        3,000    1,178,000 
Total operating expenses   1,308,000        3,000    1,311,000 
                     
LOSS FROM OPERATIONS   (536,000)       (3,000)   (539,000)
                     
OTHER INCOME (EXPENSE)                    
Other expense   (3,000)           (3,000)
Other income   180,000    311,000        491,000 
Total other income   177,000    311,000        488,000 
                     
INCOME (LOSS) BEFORE INCOME TAXES   (359,000)   311,000    (3,000)   (51,000)
Income taxes                
                     
NET INCOME (LOSS)  $(359,000)  $311,000   $(3,000)  $(51,000)
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9. RELATED PARTY TRANSACTIONS
12 Months Ended
Dec. 31, 2013
Related Party Transactions [Abstract]  
9. RELATED PARTY TRANSACTIONS

Included in the Company’s consolidated balance sheets at December 31, 2013 and December 31, 2012 are Related Party Payables. The Company has a payable of $680,000 at December 31, 2013 and December 31, 2012. Included in the amount 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 December 31, 2013: 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 has agreed to pay VGE $40,000 as reimbursement for legal fees and costs in connection with the separation of the Company and VGE. This amount is due by September 30, 2014.

 

The Company has a loan agreement with Director Dr. Kevin Schewe which is described in Note 5.

 

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 has agreed to pay a one-time fee of $5,000 to the Company upon the signing of the contract. The Company will receive license fees in the future from Winergy when they are able to secure customer relationships who will use the Company's Giant King Grass in their particular application.

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7. INCOME TAX
12 Months Ended
Dec. 31, 2013
Income Tax Disclosure [Abstract]  
7. INCOME TAX

The Company did not record a provision for income taxes for 2013 or 2012 as a result of operating losses. The Company recorded valuation allowances to fully reserve its deferred tax assets, as management believes it is more likely than not that these assets will not be realized. The valuation allowance decreased by approximately $5,140,000 for the year ended December 31, 2013 and increased by $394,000 for the year ended December 31, 2012. It is possible that management’s estimates as to the likelihood of realization of its deferred tax assets could change as a result of changes in estimated operating results. Should management conclude that it is more likely than not that these deferred tax assets are, at least in part, realizable, the valuation allowance will be reduced and recognized as a deferred income tax benefit in the statement of operations in the period of change.

  

The Company has Federal net operating loss carryovers of approximately $18,836,000 available at December 31, 2013 and State net operating loss carryovers of approximately $18,755,000 available at December 31, 2013, which expire through 2033.

 

FASB ASC 740 also addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. During the years ended December 31, 2013 and 2012, the Company did not recognize any tax liabilities related to uncertain tax positions and does not have a balance for such liabilities as of December 31, 2013.

 

The Company recognizes accrued interest and penalties, if any, associated with uncertain tax positions as part of the income tax provision. There was no accrued interest or penalties associated with uncertain tax positions recognized in the Company’s balance sheets as of December 31, 2013 and 2012. The Company is subject to income tax in the United States federal jurisdiction and various state jurisdictions and has identified its federal tax return and tax returns in state jurisdictions below as “major” tax filings. These jurisdictions, along with the years still open to audit under the applicable statutes of limitation, are as follows:

 

Jurisdiction   Tax Years
Federal   2010 - 2012
California   2010 - 2012

 

The following table reconciles the US statutory rates to the Company’s effective tax rate for 2013 and 2012.

 

    2013     2012  
U.S Statutory rates     34.0%       34.0%  
State taxes, net of Federal benefit     5.8%       5.7%  
Permanent differences     (0.1% )     (0.4% )
Change in Valuation allowance     (39.7% )     (39.3% )
Other            
Effective income tax rate     0.0%       0.0%  

 

The following are the components of the Company’s deferred tax assets and liabilities at December 31, 2013 and 2012:

 

    2013     2012  
Deferred Tax Assets:                
Net operating loss carryforwards   $ 7,499,000     $ 10,183,000  
Stock compensation expense     4,002,000       3,995,000  
Intangibles           2,176,000  
Related party interest           287,000  
Total Deferred Tax Assets     11,501,000       16,641,000  
Less: Valuation allowance     (11,501,000 )     (16,641,000 )
                 
Net Deferred Tax Assets   $     $  

 

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8. NET LOSS PER SHARE
12 Months Ended
Dec. 31, 2013
Earnings Per Share [Abstract]  
8. 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 December 31, 2013 and 2012 that are not included in the loss per share calculation since their effect would be anti-dilutive for the periods indicated:

  

    2013     2012  
Stock Options     73,408,000       67,408,000  
                 

The following table sets forth the computation of basic and diluted net loss per share for 2012 and 2012, respectively:

 

    2013     2012  
Basic and diluted net loss per share:            
Numerator:            
Net loss attributable to common stock   $ (699,000 )   $ (5,740,000 )
Denominator:                
Weighted average shares of common stock outstanding     1,466,620,587       1,385,168,793  
                 
Net loss per share of common stock, basic and diluted   $ *     $ *  

_______________

*  Less than $0.01

 

XML 44 R16.htm IDEA: XBRL DOCUMENT v2.4.0.8
10. OTHER COMMITMENTS AND CONTINGENCIES
12 Months Ended
Dec. 31, 2013
Commitments and Contingencies Disclosure [Abstract]  
10. 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 year ended December 31, 2013 and December 31, 2012, was $10,000 and $12,000, 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 to them. 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 years ending December 31, 2013 and 2012, the Company received $71,000 and $72,000, 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 $105,000 and $5,000 for the years ending December 31, 2013 and 2012, respectively.

 

License Agreement

 

Effective of as 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, VISPACE needs to achieve the milestones in the first two year period:

 

  · 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 expects to meet the milestones by September 30, 2014 and renew the license for an additional two year term. However, there can be no assurance that the Company will meet the milestones prior to the renewal date.

 

There are additional milestones that need to be met as a condition to renew the license for subsequent two year periods, in order for VIASPACE to maintain the license.

 

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 45 R34.htm IDEA: XBRL DOCUMENT v2.4.0.8
10. OTHER COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Commitments and Contingencies Disclosure [Abstract]    
Rent expense $ 10,000 $ 12,000
Revenue recognized under collaborative agreements $ 105,000 $ 5,000
XML 46 R21.htm IDEA: XBRL DOCUMENT v2.4.0.8
7. INCOME TAX (Tables)
12 Months Ended
Dec. 31, 2013
Income Tax Disclosure [Abstract]  
US statutory rates
    2013     2012  
U.S Statutory rates     34.0%       34.0%  
State taxes, net of Federal benefit     5.8%       5.7%  
Permanent differences     (0.1% )     (0.4% )
Change in Valuation allowance     (39.7% )     (39.3% )
Other            
Effective income tax rate     0.0%       0.0%  
Deferred tax assets and liabilities
    2013     2012  
Deferred Tax Assets:                
Net operating loss carryforwards   $ 7,499,000     $ 10,183,000  
Stock compensation expense     4,002,000       3,995,000  
Intangibles           2,176,000  
Related party interest           287,000  
Total Deferred Tax Assets     11,501,000       16,641,000  
Less: Valuation allowance     (11,501,000 )     (16,641,000 )
                 
Net Deferred Tax Assets   $     $  
XML 47 R26.htm IDEA: XBRL DOCUMENT v2.4.0.8
4. STOCK OPTIONS, WARRANTS AND ISSUED STOCKS (Details)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]    
Risk free interest rate, minimum 2.00% 0.99%
Risk free interest rate, maximum 2.06% 1.40%
Dividends 0.00% 0.00%
Volatility factor, minimum 134.81% 124.48%
Volatility factor, maximum 138.17% 134.79%
Expected life 6 years 8 months 1 day 6 years 8 months 1 day
Annual forfeiture rate 0% 34.4% to 35.2%
XML 48 R5.htm IDEA: XBRL DOCUMENT v2.4.0.8
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (DEFICIT) (USD $)
Common Stock
Additional Paid-In Capital
Accumulated Deficit
Total Shareholders Equity (Deficit)
Noncontrolling Interest
Total
Beginning balance, value at Dec. 31, 2011 $ 1,334,000 $ 43,653,000 $ (43,050,000) $ 1,937,000 $ 917,000 $ 2,854,000
Beginning balance, shares at Dec. 31, 2011 1,333,796,601          
Shares issued for consulting services, shares 19,000,438          
Shares issued for consulting services, value 19,000 105,000   124,000   124,000
Shares issued for salaries, shares 48,350,043          
Shares issued for salaries, value 48,000 352,000   400,000   400,000
Beneficial conversion feature of convertible debt   56,000   56,000   56,000
Stock issued upon conversion of note payable, shares 32,219,141          
Stock issued upon conversion of note payable, value 32,000 103,000   135,000   135,000
Non cash compensation related to stock options   86,000   86,000   86,000
Non cash compensation related to stock options (VGE)   84,000   84,000 27,000 111,000
Cash distribution from Ionfinity         (75,000) (75,000)
Forgiveness of debt due to VGE   2,351,000   2,351,000   2,351,000
Deconsolidation of VGE         (268,000) (268,000)
Deconsolidation of Ionfinity and DMFCC         (511,000) (511,000)
Net loss     (5,740,000) (5,740,000) (90,000) (5,830,000)
Ending balance, value at Dec. 31, 2012 1,433,000 46,790,000 (48,790,000) (567,000) 0 (567,000)
Ending balance, shares at Dec. 31, 2012 1,433,366,223          
Shares issued for consulting services, shares 35,685,445          
Shares issued for consulting services, value 36,000 370,000   406,000   406,000
Shares issued for salaries, value           0
Beneficial conversion feature of convertible debt   65,000   65,000   65,000
Stock issued upon conversion of note payable, shares 20,281,331          
Stock issued upon conversion of note payable, value 20,000 187,000   207,000   207,000
Non cash compensation related to stock options   20,000   20,000   20,000
Cash distribution from Ionfinity           0
Deconsolidation of Ionfinity and DMFCC           0
Net loss     (699,000) (699,000)   (699,000)
Ending balance, value at Dec. 31, 2013 $ 1,489,000 $ 47,432,000 $ (49,489,000) $ (568,000) $ 0 $ (568,000)
Ending balance, shares at Dec. 31, 2013 1,489,332,999          
XML 49 R10.htm IDEA: XBRL DOCUMENT v2.4.0.8
4. STOCK OPTIONS, WARRANTS AND ISSUED STOCKS
12 Months Ended
Dec. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock options, warrants and issued stocks

VIASPACE Inc. 2005 Stock Incentive Plan

 

On October 20, 2005, the BOD of the Company adopted the 2005 Stock Incentive Plan (the “Plan”) including the 2005 Non-Employee Director Option Program (the “2005 Director Plan”). The Plan was also approved by the holders of a majority of the Company’s common stock. The Plan originally provided for issuance of up to 28,000,000 shares of the Company’s common stock. On July 12, 2006, the Company filed a Form S-8 Registration Statement with the SEC registering 28,000,000 shares of the Company’s common stock. On February 14, 2008, the BOD and the holders of a majority of the Company’s common stock approved an amendment to the Plan which increased the maximum aggregate number of shares which may be issued in the Plan to 99,000,000 shares. On April 30, 2008, the Company filed a Registration Statement on Form S-8 registering 71,000,000 shares of the Company’s common stock. In addition, effective January 1, 2009 and each January 1 thereafter during the term of the Plan, the maximum number of shares under the Plan are to be increased so that the maximum number of shares is equivalent 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. On February 4, 2009, the Company filed a Registration Statement on Form S-8 registering 146,500,000 shares of the Company’s common stock based on the number of shares of common stock outstanding on December 31, 2008.

 

The Plan is designed to provide additional incentive to employees, directors and consultants of the Company through awarding incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock and other awards. On February 13, 2006, the BOD approved the 2006 Non-Employee Director Option Program (the “2006 Director Plan”) replacing the 2005 Director Plan and the 2006 Director Plan was approved by the holders of a majority of the Company’s common stock. The 2006 Director Plan awards a one-time grant of 125,000 options, or such other number of options as determined by the BOD as plan administrator of the 2006 Director Plan, to newly appointed outside members of the Company’s BOD and annual grants of 50,000 options, or such other number of options as determined by the BOD, to outside members of the BOD that have served at least nine months.

 

The Company’s BOD administers the Plan, selects the individuals to whom options will be granted, determines the number of options to be granted, and the term and exercise price of each option. Stock options granted pursuant to the terms of the Plans generally cannot be granted with an exercise price of less than 100% of the fair market value on the grant date. The term of the options granted under the Plan cannot be greater than 10 years. Options to employees and directors generally vest over four years but the actual length of the vesting term is determined by the BOD. At December 31, 2013, there were 24,870,002 shares available for future grant.

 

During 2013, the Company granted 7,000,000 stock options to directors and employees to purchase common shares. During 2013, 1,000,000 stock options were cancelled due to consultants terminating employment or service with the Company.

 

FASB ASC Topic 718 requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors based on estimated fair values using the modified prospective transition method. FASB ASC Topic requires companies to estimate the fair value of share-based payment awards to employees and directors on the date of grant using an option pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite services periods on a straight-line basis in the Company’s Consolidated Statements of Operations.

  

The Company adopted the detailed method provided in FASB ASC Topic for calculating the beginning balance of the additional paid-in capital pool (“APIC pool”) related to the tax effects of employee stock-based compensation, and to determine the subsequent impact on the APIC pool and Consolidated Statements of Cash Flows of the income tax effects of employee stock-based compensation awards that are outstanding upon the adoption of FASB ASC Topic.

 

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. For stock options issued to employees, directors, consultants and advisory board members for 2013 and 2012, the fair value was estimated at the date of grant using the following range of assumptions: 

 

    2013     2012  
Risk free interest rate     2.00% - 2.06%       0.99% - 1.40%  
Dividends     0%       0%  
Volatility factor     134.81% - 138.17%       124.48% - 134.79%  
Expected life     6.67 years       6.67 years  
Annual forfeiture rate     0%       34.4% - 35.2%  

 

Employee and Director Option Grants

 

The following table summarizes activity for employees and directors in the Company’s Plan at December 31, 2013:

 

   

Number of

Shares

   

Weighted-

Average

Exercise

Price Per

Share

   

Weighted-

Average

Remaining

Contractual

Term In Years

   

Aggregate

Intrinsic

Value

 
Outstanding at December 31, 2012     67,408,000     $ 0.0131              
Granted     7,000,000       0.0135              
Exercised                        
Forfeited     (1,000,000 )     0.0076              
Outstanding at December 31, 2013     73,408,000     $ 0.0132       6.77     $ 235,000  
Exercisable at December 31, 2013     66,283,000     $ 0.0132       6.59     $ 230,000  

  

The weighted-average grant date fair value of stock options granted during 2013 and 2012 was $0.0135 and $0.004 per share, respectively. The Plan recorded $20,000 and $86,000 of compensation expense for employee and director stock options for the years ending December 31, 2013 and 2012, respectively. At December 31, 2013, there was $78,000 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 and 9 months. For the years ending December 31, 2013 and 2012, the fair value of options vested for employees and directors was $875,000 and $800,000, respectively. There were no options exercised during 2013.

XML 50 R27.htm IDEA: XBRL DOCUMENT v2.4.0.8
4. STOCK OPTIONS, WARRANTS AND ISSUED STOCKS (Details 1) (Employee And Director Option Grants, USD $)
12 Months Ended
Dec. 31, 2013
Employee And Director Option Grants
 
Number of Options Outstanding, Beginning 67,408,000
Number of Options Granted 7,000,000
Number of Options Exercised   
Number of Options Forfeited (1,000,000)
Number of Options Outstanding, Ending 73,408,000
Number of Options Exercisable 66,283,000
Weighted Average Exercise Price Outstanding, Beginning $ 0.0131
Weighted Average Exercise Price Granted $ 0.0135
Weighted Average Exercise Price Exercised   
Weighted Average Exercise Price Forfeited $ 0.0076
Weighted Average Exercise Price Outstanding, Ending $ 0.0132
Weighted Average Exercise Price Exercisable $ 0.0132
Weighted Average Remaining Contractual Life (in years) Outstanding 6 years 9 months 7 days
Weighted Average Remaining Contractual Life (in years) Exercisable 6 years 7 months 2 days
Aggregate Intrinsic Value, Outstanding $ 235,000
Aggregate Intrinsic Value, Exercisable $ 230,000
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4. STOCK OPTIONS, WARRANTS AND ISSUED STOCKS (Tables)
12 Months Ended
Dec. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Fair value assumptions
    2013     2012  
Risk free interest rate     2.00% - 2.06%       0.99% - 1.40%  
Dividends     0%       0%  
Volatility factor     134.81% - 138.17%       124.48% - 134.79%  
Expected life     6.67 years       6.67 years  
Annual forfeiture rate     0%       34.4% - 35.2%  
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, 2012     67,408,000     $ 0.0131              
Granted     7,000,000       0.0135              
Exercised                        
Forfeited     (1,000,000 )     0.0076              
Outstanding at December 31, 2013     73,408,000     $ 0.0132       6.77     $ 235,000  
Exercisable at December 31, 2013     66,283,000     $ 0.0132       6.59     $ 230,000