Quantumsphere 8-K/A Index to the Financial Statements

EXHIBIT 99.3: Pro Forma Financial Information.

Following this introduction is the following pro forma financial information with respect to QuantumSphere, Inc., a Nevada corporation formerly known as Way Cool Imports, Inc. (the “Registrant”), and QuantumSphere, Inc., a California corporation (“QSI”):

· Pro Forma Combined Balance Sheet as of December 31, 2013;

· Pro Forma Combined Statement of Operations for the Year ended December 31, 2013;

· Pro Forma Combined Balance Sheet as of March 31, 2014; and

· Pro Forma Combined Statement of Operations for the Three Months Ended March 31, 2014.

With respect to such pro forma financial information, on April 22, 2014, the Registrant consummated the Merger pursuant to which a wholly-owned subsidiary of the Registrant merged with and into QSI, with QSI surviving as a wholly-owned subsidiary of the Registrant. In the Merger, all of the outstanding shares of QSI capital stock were converted into the right to receive an aggregate of 17,177,066 shares of the Registrant’s common stock, representing approximately 80.4% of the outstanding shares of the Registrant’s common stock following the Merger.

The following unaudited pro forma combined balance sheets as of December 31, 2013 and March 31, 2014, and pro forma combined statements of operations for the year ended December 31, 2013 and the three months ended March 31, 2014 reflect the combination of the Registrant and QSI, and the issuance of shares of the Registrant’s common stock to QSI shareholders. The unaudited pro forma combined balance sheet has been derived from audited consolidated historical financial statements of both the Registrant and QSI. The financial statements of the Registrant as of December 31, 2013 and March 31, 2014 are contained in its Annual Report on Form 10-K and its Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on March 5, 2014 and April 15, 2014, respectively. The financial statements of QSI as of December 31, 2013 and 2012 are incorporated elsewhere in this Current Report on Form 8-K. The unaudited pro forma condensed combined balance sheets as of December 31, 2013 and March 31, 2014 were prepared as if the Merger had occurred on those dates, and the pro forma combined statements of operations for the year ended December 31, 2013 and the three months ended March 31, 2014 were prepared as if the Merger had occurred on January 1, 2013 and January 1, 2014, respectively.

Although from a legal perspective, the Registrant acquired QSI in the Merger, from an accounting perspective, the Merger is viewed as a reverse acquisition where QSI acquired the assets of the Registrant. The transaction is equivalent to the issuance of common stock by QSI for the net assets of the Registrant. The equity section of the pro forma combined balance sheets reflects the total outstanding shares of the Registrant’s common stock for the new merged entity. The Merger is viewed as a reverse acquisition because QSI’s shareholders now own approximately 80.4% of the outstanding shares of the Registrant after the transaction, QSI’s directors and officers now serve as the Registrant’s directors and officers, and the operations of QSI will be the ongoing business of the Registrant. Management does not intend to continue the operations previously conducted by the Registrant.

In the opinion of management of the Registrant and QSI, all adjustments necessary to present fairly the pro forma combined balance sheet have been made based on the terms and structure of the transaction.

The unaudited pro forma combined balance sheets and statements of operations are not necessarily indicative of what actual results would have been had the Merger or issuance of the Registrant’s common stock to QSI shareholders occurred at the beginning of the applicable period nor do they purport to indicate the results of future operations of the Registrant and QSI. The unaudited pro forma combined balance sheets and statements of operations should be read in conjunction with the accompanying notes and historical financial statements and notes to the financial statements of the Registrant and QSI.

EXHIBIT 99.3-1

Pro Forma Combined Balance Sheet as of December 31, 2013
	Registrant			QSI			Pro-Forma Adjustments			JE #	Combined
ASSETS
Current Assets
Cash and cash equivalents	$	3,865		$	375,235		$				$	379,100
Accounts receivable		—			18,819							18,819
Prepaid expenses and other current assets		—			29,887							29,887
Total current assets		3,865			423,941							427,806
Property and Equipment, net		—			128,316							128,316
Patents, net					109,554							109,554
Other Assets		—			8,761							8,761
Total assets	$	3,865		$	670,572		$	—			$	674,437
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued expenses	$	33,473		$	1,022,742		$	(281,333	)	1	$	774,882
Note payable		10,300			—							10,300
Note payable – related party		30,000			—							30,000
Convertible notes payable – net of discounts		—			2,667,500			(2,667,500	)	1		—
Total current liabilities		73,773			3,690,242			(2,948,833	)			815,182
Deferred compensation		48,000			—							48,000
Note payable		15,575			—							15,575
Total liabilities		137,348			3,690,242			(2,948,833	)			878,757
Stockholders’ Deficit
Convertible preferred stock, no shares outstanding		—			—							—
Preferred stock, no shares outstanding		—			—							—
Common stock, 54,120,000 and 11,056,059 shares issued pre-merger, respectively, and 15,376,757 shares issued post-merger		54,120			21,496,878			(21,535,621	)	1,2,3		15,377
Additional paid-in capital		261,030			9,607,472			24,035,821		1,2		33,904,323
Accumulated deficit		(448,633	)		(34,124,020	)		448,633		2		(34,124,020	)
Total stockholders’ deficit		(133,483	)		(3,019,670	)		2,948,833				(204,320	)
Total liabilities and stockholders’ deficit	$	3,865		$	670,572		$	—			$	674,437

EXHIBIT 99.3-2

Notes to Pro-Forma Combined Balance Sheet (Unaudited) December 31, 2013

1. To record the conversion of convertible notes and related accrued interest to 3,025,698 shares of common stock. 

2. To present the capital structure of the legal parent.

3. To include the surrender of Registrant’s shares prior to the merger

Pro Forma Combined Statement of Operations for the Year Ended December 31, 2013
	Registrant			QSI			Pro-Forma Adjustments		JE #	Combined
Net sales	$	—		$	244,061		$			$	244,061
Cost of sales		—			278,581						278,581
Gross profit (loss)	$	—		$	(34,520	)	$	—		$	(34,520	)
Operating expenses	$			$			$			$
Research and development		—			716,140						716,140
Selling, marketing and advertising		—			28,569						28,569
General and administrative		51,576			1,349,984						1,401,560
Total operating expenses		51,576			2,094,693						2,146,269
Loss from operations before other income (expense)		(51,576	)		(2,129,213	)					(2,180,789	)
Other income (expense)
Interest expense - net		(3,495	)		(266,371	)					(269,866	)
Interest expense – amortization of note discounts		—			(303,379	)					(303,379	)
Gain on disposal of assets		—			10,000						10,000
Total other income (expense)		(3,495	)		(559,750	)					(563,245	)
Loss before provision for income taxes		(55,071	)		(2,688,963	)					(2,744,034	)
Provision for income taxes		—			800						800
Net loss	$	(55,071	)	$	(2,689,763	)	$			$	(2,744,834	)

EXHIBIT 99.3-3

Pro Forma Combined Balance Sheet as of March 31, 2014
	Registrant			QSI			Pro-Forma Adjustments			JE #		Combined
ASSETS
Current Assets
Cash and cash equivalents	$	128,693		$	2,619,939		$					$	2,748,632
Accounts receivable		—			10,930								10,930
Prepaid expenses and other current assets		—			35,463								35,463
Total current assets		128,693			2,666,332								2,795,025
Property and Equipment, net		—			967,387								967,387
Patents, net		—			108,985								108,985
Other Assets		—			24,578								24,578
Total assets	$	128,693		$	3,767,282		$	—				$	3,895,975
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued expenses	$	110,265		$	1,183,862		$	(498,923	)		1	$	795,204
Note payable – related party		30,000			—								30,000
Convertible notes payable		—			6,642,500			(6,642,500	)		1		—
Total current liabilities		140,265			7,826,362			(7,141,423	)				825,204
Stockholders’ Deficit
Convertible preferred stock, no shares outstanding		—			—								—
Preferred stock, no shares outstanding		—			—								—
Common stock, 57,025,000 and 11,056,059 shares outstanding pre-merger, respectively, and 20,703,253 shares post-merger		57,025			21,496,878			(21,533,200	)		1,2,3		20,703
Additional paid-in capital		434,625			9,927,637			28,171,401			1,2		38,533,663
Accumulated deficit		(503,222	)		(35,483,595	)		503,222			2		(35,483,595	)
Total liabilities and stockholders’ deficit	$	128,693		$	3,767,282		$	—				$	3,895,975
Total stockholders’ deficit		(11,572	)		(4,059,080	)		7,141,423					3,070,771

Notes to Pro-Forma Combined Balance Sheet (Unaudited) March 31, 2014

1. To record the conversion of convertible notes and related accrued interest to 5,447,194 shares of common stock. 

2. To present the capital structure of the legal parent.

3. To include the surrender of Way Cool shares prior to the merger

EXHIBIT 99.3-4

Pro Forma Combined Statement of Operations for the Three Months Ended March 31, 2014
	Registrant			QSI			Pro-Forma Adjustments		JE #	Combined
Net sales		—			15,088			—			15,088
Cost of sales		—			98,246			—			98,246
Gross profit (loss)		—			(83,158	)		—			(83,158	)
Operating expenses
Research and development		—			287,388			—			287,388
Selling, marketing and advertising		—			13,435			—			13,435
General and administrative		54,042			754,615			—			808,657
Total operating expenses		54,042			1,055,438			—			1,109,480
Loss from operations before other income (expense)		(54,042	)		(1,138,596	)		—			(1,192,638	)
Other income (expense)
Interest expense - net		(547	)		(225,179	)		—			(225,726	)
Other income		—			5,000			—			5,000
Total other income (expense)		(547	)		(220,179	)		—			(220,726	)
Loss before provision for income taxes		(54,589	)		(1,358,775	)		—			(1,413,364	)
Provision for income taxes		—			800			—			800
Net loss		(54,589	)		(1,359,575	)		—			(1,414,164	)

EXHIBIT 99.3-5