BioPower Operations (BOPO) 10-Q 2013 Q3 Quarterly report

U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2013

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to __________________

Commission File Number: 333-172139

BioPower Operations Corporation

(Exact name of registrant as specified in its charter)

Nevada	27-4460232
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

1000 Corporate Drive, Suite 200, Fort Lauderdale, Florida 33334

(Address of principal executive offices)

Issuer’s telephone number, including area code: (954) 202-6660

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

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 ¨

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

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨ (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 ¨ No x

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.  

As of October 21, 2013, the registrant had 18,056,007 shares of common stock, par value $0.0001 per share, outstanding.

BIOPOWER OPERATIONS CORPORATION

(A Developmental Stage Company)

CONTENTS

		Page
PART I.	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	4
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	23
ITEM 4.	CONTROLS AND PROCEDURES	23
PART II.	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	23
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	23
ITEM 3.	DEFAULT UPON SENIOR SECURITIES	24
ITEM 4.	MINE SAFETY DISCLOSURES	25
ITEM 5.	OTHER INFORMATION	25
ITEM 6.	EXHIBITS	25
SIGNATURES		26
Exhibit 31.1	Certification Pursuant to Section 302 of the Sarbanes Oxley Act
Exhibit 32.1	Certification Pursuant to Section 906 of the Sarbanes Oxley Act

2

 

CONTENTS

	Page
Consolidated Balance Sheets as of August 31, 2013 (unaudited) and November 30, 2012	4
Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended August 31, 2013 and 2012, and from September 13, 2010 (Inception) to August 31, 2013 (unaudited)	5
Consolidated Statement of Stockholders’ Deficit for the nine months ended August 31, 2013 (unaudited)	6
Consolidated Statements of Cash Flows for the nine months ended August 31, 2013 and 2012, and from September 13, 2010 (Inception) to August 31, 2013 (unaudited)	7
Notes to Consolidated Financial Statements (unaudited)	9 - 17

3

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

BioPower Operations Corporation and Subsidiaries

(A Development Stage Company)

Consolidated Balance Sheets

	August 31, 2013		November 30, 2012
	(Unaudited)
Assets
Current Assets
Cash	$	50,583	$	16,956
Accounts receivable		25,389		-
Available-for-sale securities		-		38,250
Prepaid expenses		8,419		682
Total Current Assets		84,391		55,888
Equipment - net		14,334		18,761
Security deposit		22,853		11,660
		37,187		30,421
Total Assets	$	121,578	$	86,309
Liabilities and Stockholders' Deficit
Current Liabilities
Accounts payable and accrued expenses	$	476,688	$	413,586
Accounts payable and accrued expenses - related parties		938,551		755,365
Common stock payable		841,163		208,500
Notes payable		88,000		89,800
Notes payable - related parties		175		40,675
Deferred revenue		-		31,429
Total Current Liabilities		2,344,577		1,539,355
Long-Term Liabilities
Deferred revenue		-		25,000
Total Long-Term Liabilities		-		25,000
Total Liabilities		2,344,577		1,564,355
Stockholders' Deficit
Preferred stock, $1 par value; 10,000 shares authorized; 1 share issued and outstanding		1		1
Common stock, $0.0001 par value, 100,000,000 shares authorized; 18,056,007 shares issued and outstanding		1,806		1,806
Additional paid-in capital		887,384		802,384
Deficit accumulated during the development stage		(3,112,190)		(2,244,437)
Other comprehensive loss		-		(37,800)
Total Stockholders' Deficit		(2,222,999)		(1,478,046)
Total Liabilities and Stockholders' Deficit	$	121,578	$	86,309

See accompanying notes to consolidated financial statements

4

BioPower Operations Corporation and Subsidiaries

(A Development Stage Company)

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

	Three Months Ended August 31,				Nine Months Ended August 31,				September 13, 2010 (Inception) to
	2013		2012		2013		2012		August 31, 2013
General and administrative expenses	$	351,326	$	247,790	$	753,469	$	800,641	$	2,704,278
Other income (expense)
Interest expense		(942)		(34,546)		(30,809)		(119,074)		(154,874)
Interest expense - related party		1		(343)		(807)		(545)		(1,756)
Loss on settlement of debt and accrued expenses		(190,921)		-		(190,921)				(190,921)
Loss on impairment of available-for-sale securities		-		-		(76,050)		-		(76,050)
Loss on sale of available-for-sale marketable securities		-		(32,038)		-		(32,038)		(118,640)
Loan cost		-		(6,250)		-		(6,250)		(6,250)
Loss on impairment of license		-		-		-		-		(240,795)
Gain on settlement of consulting revenue receivable		-		-		-		133,500		133,500
Consulting revenue		168,674		20,000		354,967		43,571		418,538
Consulting expense		(87,217)		-		(170,664)		-		(170,664)
Total other income (expense) - net		(110,405)		(53,177)		(114,284)		19,164		(407,912)
Net loss	$	(461,731)	$	(300,967)	$	(867,753)	$	(781,477)
Net loss per common share - basic and diluted	$	(0.03)	$	(0.02)	$	(0.05)	$	(0.04)
Weighted average number of common shares
outstanding during the period - basic and diluted		18,056,007		18,056,007		18,056,007		18,062,422
Comprehensive loss
Net loss	$	(461,731)	$	(300,967)	$	(867,753)	$	(781,477)	$	(3,112,190)
Unrealized loss on available-for-sale marketable securities		-		(101,204)		-		(132,704)		(37,800)
Reclassification adjustment due to impairment on available-for-sale securities		-		-		37,800		-		37,800
Comprehensive loss	$	(461,731)	$	(402,171)	$	(829,953)	$	(914,181)	$	(3,112,190)

See accompanying notes to consolidated financial statements 

5

BioPower Operations Corporation and Subsidiaries

(A Development Stage Company)

Consolidated Statement of Stockholders' Deficit

For the Nine Months Ended August 31, 2013

(Unaudited)

									Deficit
									Accumulated		Accumulated
	Preferred Stock,			Common Stock,			Additional		during		Other		Total
	$1 Par Value			$0.0001 Par Value			Paid In		Development		Comprehensive		Stockholders'
	Shares	Amount		Shares	Amount		Capital		Stage		Loss		Deficit
Balance - November 30, 2012	1	$	1	18,056,007	$	1,806	$	802,384	$	(2,244,437)	$	(37,800)	$	(1,478,046)
Debt discount	-		-	-		-		25,000		-		-		25,000
Reclassification adjustment due to impairment on available-for-sale securities	-		-	-		-		-		-		37,800		37,800
Stock-based compensation expense	-		-	-		-		60,000		-		-		60,000
Net loss	-		-	-		-		-		(867,753)		-		(867,753)
Balance - August 31, 2013	1	$	1	18,056,007	$	1,806	$	887,384	$	(3,112,190)	$	-	$	(2,222,999)

 See accompanying notes to consolidated financial statements

6

BioPower Operations Corporation and Subsidiaries

(A Development Stage Company)

Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended August 31,				September 13, 2010 (Inception) to
	2013		2012		August 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(867,753)	$	(781,477)	$	(3,112,190)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of license		-		3,768		9,205
Loss on impairment of license		-		-		240,795
Loss on impairment of marketable securities		76,050		-		76,050
Loss on settlement of debt and accrued expenses		190,921		-		190,921
Loss on sale of available-for-sale marketable securities		-		32,038		118,640
Stock-based compensation expense		60,000		-		60,000
Depreciation		4,427		4,172		13,426
Amortization of debt discount		25,000		116,429		145,000
Loan cost		-		6,250		6,250
Amortization of stock to be issued for services rendered		51,333		-		101,333
Warrants issued for services rendered		-		-		60,800
Available-for-sale securities received as consideration for consulting revenue		-		(120,000)		(120,000)
Gain on settlement of consulting revenue receivable		-		(133,500)		(133,500)
Changes in operating assets and liabilities:
Accounts receivable		(25,389)		-		(25,389)
Prepaid expenses		(11,070)		267		(11,752)
Security deposit		(11,193)		-		(22,853)
Accounts payable and accrued expenses		67,494		157,597		481,080
Accounts payable and accrued expenses - related parties		310,830		321,971		1,066,195
Common stock payable for services rendered		-		108,500		108,500
Deferred revenue		(56,429)		76,429		-
Net Cash Used In Operating Activities		(185,779)		(207,556)		(747,489)

See accompanying notes to consolidated financial statements 

7

BioPower Operations Corporation and Subsidiaries

(A Development Stage Company)

Consolidated Statements of Cash Flows

(Continued)

(Unaudited)

	Nine Months Ended August 31,				September 13, 2010 (Inception) to
	2013		2012		August 31, 2013
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of available-for-sale securities		-		11,330		52,560
Purchase of equipment		-		-		(27,760)
Net Cash Provided By Investing Activities		-		11,330		24,800
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible debt		25,000		90,000		75,000
Proceeds from convertible debt - related party		-		-		70,000
Proceeds from notes payable - related parties		-		42,092		65,973
Proceeds from notes payable		181,506		12,000		202,306
Repayment of notes payable - related parties		-		-		(25,298)
Repayment of notes payable		-		-		(1,000)
Proceeds from issuance of preferred stock		-		-		1
Proceeds from issuance of common stock		-		-		323,390
Proceeds from common stock to be issued		12,900		50,200		62,900
Net Cash Provided By Financing Activities		219,406		194,292		773,272
Net Increase (Decrease) in Cash		33,627		(1,934)		50,583
Cash - Beginning of Period		16,956		6,111		-
Cash - End of Period	$	50,583	$	4,177	$	50,583
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash Paid During the Period for:
Income Taxes	$	-	$	-	$	-
Interest	$	-	$	-	$	-
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for license	$	-	$	-	$	250,000
Common stock to be issued for services rendered	$	48,000	$	-	$	48,000
Common stock to be issued for conversion of debt and accrued expenses	$	29,392	$	-	$	29,392
Common stock to be issued for conversion of debt and accrued expenses - related party	$	127,644	$	-	$	127,644
Common stock to be issued for conversion of notes payable	$	183,306	$	-	$	183,306
Common stock to be issued for conversion of notes payable - related party	$	40,500	$	-	$	40,500
Debt discount recorded on convertible debt	$	25,000	$	90,000	$	75,000
Debt discount recorded on convertible debt - related party	$	-	$	-	$	70,000
Conversion of convertible debt to common stock payable	$	-	$	-	$	50,000
Reclassification from convertible debt to notes payable	$	-	$	-	$	70,000
Cancellation of common stock - founders	$	-	$	-	$	1

See accompanying notes to consolidated financial statements

8

BioPower Operations Corporation and Subsidiaries

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2013

Unaudited

Note 1. Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is our opinion, however, that the accompanying unaudited interim consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The accompanying unaudited interim consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended November 30, 2012 as filed with the SEC, which contains the audited financial statements and notes thereto, together with Management’s Discussion and Analysis, for the years ended November 30, 2012 and 2011. The financial information as of November 30, 2012 is derived from the audited financial statements presented in our Annual Report on Form 10-K for the year ended November 30, 2012. The interim results for the three and nine months ended August 31, 2013 are not necessarily indicative of the results to be expected for the year ending November 30, 2013 or for any future interim periods.

Reverse Stock Split

On August 6, 2013, the Company effected a 1-for-5 reverse stock split of its common stock (“Reverse Split”). As a result of the Reverse Split, every five shares of the common stock of the Company were combined into one share of common stock. Immediately after the September 4, 2013 effective date, the Company had 18,056,007 shares of common stock issued and outstanding. All share and per share amounts have been retroactively restated to reflect the Reverse Split. Effective at the same time as the Reverse Split, the authorized number of shares of our common stock was proportionately decreased from 500,000,000 shares to 100,000,000 shares. The par value remained the same.

Note 2. Nature of Operations and Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying unaudited interim consolidated financial statements include the accounts of BioPower and its wholly-owned and majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Development Stage

The Company is a development stage company and has primarily generated revenues from a consulting agreement and from revenues earned from the testing phase in connection with the Testing Services Agreement in Paraguay (see Note 10). Revenues recognized to date are not indicative of future expected revenues, once the Company begins marketing its fertilizer related products and bio oils to customers.

The Company's unaudited interim consolidated financial statements are presented as those of a development stage enterprise. Activities during the development stage primarily include negotiating distribution agreements and marketing the territory for distribution outlets for its fertilizer related products and bio oils. The Company, while seeking to implement its business plan, will look to obtain additional debt and/or equity related funding opportunities. The Company has not generated any revenues from its planned and principal operations since inception.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets at liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited interim consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates.

9

BioPower Operations Corporation and Subsidiaries

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2013

Unaudited

Currently, the Company derives revenue from the consulting services provided to third parties. Revenue is recognized when the contract is signed, the fees are fixed or determinable, delivery of service has occurred, and collectability of the fees is considered probable. Consulting services are recognized ratably over the term of the agreement or as services are rendered. Amounts billed to customers or payments received from customers prior to providing services and for which the related revenue recognition criteria have not been met are recorded as deferred revenue and recognized ratably as revenue over the term of the agreement.

Reclassification

Reclassifications have been made to certain prior period amounts to conform to the current period presentation. These reclassifications have no effect on the financial position or on the results of operations or cash flows for the periods presented.

Marketable Securities

At the time of acquisition, a security is designated as held-to-maturity, available-for-sale or trading, depending on the Company’s ability and intent to hold such security to maturity. Securities classified as trading and available-for-sale are reported at fair value, while securities classified as held-to-maturity are reported at amortized cost.

Marketable securities are composed of available-for-sale securities and are reported at fair value. Realized gains and losses on sales of investments are recognized in net income on the specific identification basis. Changes in the fair values of securities that are considered temporary are recorded as unrealized gains and losses in accumulated other comprehensive income (loss) within stockholders’ equity. Other-than-temporary declines in market value from original cost are reflected in operating income in the period in which the unrealized losses are deemed other than temporary. In order to determine whether other-than-temporary declines in market value have occurred, the duration of the decline in value and the Company’s ability to hold the investment are considered in conjunction with an evaluation of the strength of the underlying collateral and the extent to which the investment’s amortized cost or cost, as appropriate, exceeds its related market value. The Company undertook a review of the value of its available-for-sale securities and determined that the value of its securities had been impaired. Accordingly, the Company recorded an impairment charge of $76,050 in the accompanying unaudited consolidated statement of operations during the nine months ended August 31, 2013. The impairment results from the Company’s inability to obtain the underlying shares of common stock from its escrow agent, as the escrow agent has refused to release these shares to the Company (see Note 9).

The following table summarizes marketable securities held at August 31, 2013 and November 30, 2012, all of which are classified as available-for-sale:

	Cost		Impairment Charge		Fair Value
August 31, 2013
Common stock	$	76,050	$	76,050	$	-
Total available-for-sale securities	$	76,050	$	76,050	$	-

	Cost		Unrealized Loss		Fair Value
November 30, 2012
Common stock	$	76,050	$	37,800	$	38,250
Total available-for-sale securities	$	76,050	$	37,800	$	38,250

The Company did not realize any gains and/or losses on sales of investments during the three and nine months ended August 31, 2013. During the three and nine months ended August 31, 2012, the Company sold 2,436,000 shares of its available-for-sale securities, for proceeds of $11,330, resulting in a loss on sale of $29,838. In addition, the Company was required to pay 500,000 shares in available-for-sale securities, having a cost basis of $8,450 and a fair market value of $6,250 as a loan collection fee, which resulted in an additional loss of $2,200 (see Note 11).

The Company did not recognize any dividend or interest income during the three and nine months ended August 31, 2013 and 2012. The Company has a 100% concentration in one publicly traded stock.

10

BioPower Operations Corporation and Subsidiaries

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2013

Unaudited

Earnings per share

Basic loss per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive.

The computation of basic and diluted loss per share for the three and nine months ended August 31, 2013 and 2012, excludes the common stock equivalents of the following potentially dilutive securities because their inclusion would be anti-dilutive:

	August 31,
	2013	2012
Convertible debt ($120,000 at $1.25 per share)	-	96,000
Common stock payable	6,773,617	80,000
Total common stock equivalents	6,773,617	176,000

Customer Concentration

During the three months ended August 31, 2013, one customer accounted for 96% of consulting revenue. During the nine months ended August 31, 2013, two customers accounted for 82% and 16%, respectively, of consulting revenue. During the three and nine months ended August 31, 2012, one customer accounted for 100% of consulting revenue. At August 31, 2013, all accounts receivable are with one customer.

Recent Accounting Pronouncements

There are no new accounting pronouncements that are expected to have any material impact on the Company’s consolidated financial statements.

Note 3. Going Concern

As reflected in the accompanying consolidated financial statements, the Company had a net loss of $867,753 and net cash used in operations of $185,779 for the nine months ended August 31, 2013. Additionally, the Company had a working capital deficit of $2,260,186 and a stockholders’ deficit of $2,222,999 at August 31, 2013. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern is dependent on Management's plans, which include potential asset acquisitions, mergers or business combinations with other entities, further implementation of its business plan and continuing to raise funds through debt and/or equity financings. The Company will likely rely upon related party debt and/or equity financing in order to ensure the continuing existence of the business.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

11

BioPower Operations Corporation and Subsidiaries

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2013

Unaudited

Note 4. Notes Payable and Convertible Debt

Notes payable consists of the following:

	Balance		Interest Rate		Maturity
Balance - November 30, 2012	$	89,800
Borrowings		181,506	8	%	Due on demand
Conversions of borrowings to equity		(183,306)
Balance - August 31, 2013	$	88,000

On June 21, 2013, the Company issued two of its investors a total of 3,122,800 shares of its common stock in full satisfaction of notes payable, amounting to $183,306, along with accrued interest of $4,062.On the date of conversion, the notes payable and accrued interest were valued at $281,052, or $0.09 per share, based on the closing price of the common stock. The Company recorded a loss on the settlement of debt and accrued expenses of $93,684 during the three months ended August 31, 2013 as a result of the conversion. As of August 31, 2013, the 3,122,800 shares have not been issued and are included in common stock payable.

Accrued interest at August 31, 2013 and November 30, 2012 amounted to $5,092 and $3,674, respectively, which is included as a component of accounts payable and accrued expenses. Interest expense on notes payable to third parties amounted to $942 and $1,214 for the three months ended August 31, 2013 and 2012, respectively, and $5,479 and $2,645 for the nine months ended August 31, 2013 and 2012, respectively.

Convertible debt consists of the following:

	Balance		Interest Rate		Maturity	Conversion Price
Balance - November 30, 2012	$	-
Borrowings		25,000	4	%	Due on demand	$	0.25
Conversions of borrowings to equity		(25,000)
Balance - August 31, 2013	$	-

In January 2013, a third party investor advanced $25,000. The lender could convert the loan into 100,000 restricted shares of the Company at $0.25 per share. The Company determined that the loan met the definition of a conventional convertible debt since the holder of the note could only realize the benefit of the conversion option by exercising it and receiving the entire amount of proceeds in a fixed number of shares or cash. The loan was deemed to have a beneficial conversion feature because the fair value of the stock exceeded the effective conversion price embedded in the loan on the commitment date. Accordingly, the Company recorded the value of the beneficial conversion feature, which was determined to be $25,000, as a discount to the loan and a corresponding increase to additional paid in capital. The amount was immediately recognized as interest expense since the loan is due on demand.

In order to induce the investor to convert his loan promptly, the Company reduced the conversion price to $0.06 per share, thereby increasing the number of shares issuable upon conversion to 416,667 shares. The carrying value of the loan on June 10, 2013, the date of conversion, was $25,000 and the closing price of the Company’s common stock on that date was $0.06 per share. The Company accounted for the conversion of loan in accordance with ASC 470, “Debt with Conversion and Other Options.” The Company determined the fair value of the securities issued in connection with the conversion to be $25,000 and the fair value of the securities issuable pursuant to the original terms of the loan agreement to be $6,000, thereby resulting in $19,000 of incremental consideration paid by the Company upon conversion of the note. In addition, the Company issued the lender 5,500 shares of its common stock in full satisfaction of accrued interest of $330 related to this note.The Company recorded a loss on the settlement of debt and accrued expenses of $19,165 during the three months ended August 31, 2013 as a result of the conversion. As of August 31, 2013, the 422,167 shares have not been issued and are included in common stock payable.

Interest expense on convertible debt with third parties amounted to $0 and $330 for the three and nine months ended August 31, 2013 and 2012, respectively.

12

BioPower Operations Corporation and Subsidiaries

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2013

Unaudited

Note 5. Notes Payable – Related Parties

Notes payable – related parties consists of the following: 

	Balance		Interest Rate		Maturity
Balance - November 30, 2012	$	40,675
Conversions of borrowings to equity		(40,500)
Balance - August 31, 2013	$	175	0	%	Due on demand

On June 21, 2013, the Company issued its Chief Executive Officer 707,500 shares of its common stock in full satisfaction of his notes payable, amounting to $40,500, along with accrued interest of $1,950.On the date of conversion, the notes payable and accrued interest were valued at $63,675, or $0.09 per share, based on the closing price of the common stock. The Company recorded a loss on the settlement of debt and accrued expenses of $21,225 during the three months ended August 31, 2013 as a result of the conversion.As of August 31, 2013, the 707,500 shares have not been issued and are included in common stock payable.

Accrued interest at August 31, 2013 and November 30, 2012 amounted to $185 and $854, respectively, which is included as a component of accounts payable and accrued expenses – related parties. Interest expense on notes payable to related parties amounted to $(1) and $343 for the three months ended August 31, 2013 and 2012, respectively, and $807 and $545 for the nine months ended August 31, 2013 and 2012, respectively.

Note 6. Stockholders’ Deficit

(A)Common Stock

The following represents the Company’s shares authorized for issuance as of August 31, 2013:

Type	Quantity	Valuation		Range of Value per share
Balance - November 30, 2012	120,000	$	208,500	$	1.10 – 3.25
Services rendered (1)	91,250		48,000		0.18 – 0.80
Cash	215,000		12,900		0.06
Debt and accrued expense conversions	3,544,967		325,547		0.06 – 0.09
Debt and accrued expense conversions – related parties	2,802,400		246,216		0.06 – 0.09
Balance – August 31, 2013 (2)	6,773,617	$	841,163	$	0.06 – 3.25

(1)	Fair value based upon the quoted closing market price of the Company’s common stock as of the authorized issuance date (date of grant).
(2)	The 6,773,617 shares are recorded as common stock payable because they have not been issued in connection with settling amounts due under contractual arrangements. Given these shares have not been issued, they are not included in earnings per share for the three and nine months ended August 31, 2013 and 2012.

(B)Restricted Stock

On June 25, 2013, the Company’s Chief Executive Officer and Director of Business Strategy were each granted 2,000,000 shares of common stock in exchange for continuing to work without cash payment of their full salary and to convert accrued expenses and a note payable (see Notes 5 and 7). The shares will vest after one year of service and will not replace the Company’s obligation to pay the required salary over the next year. The fair value of the common stock at the date of grant was $0.09 per share based upon the closing market price on the date of grant. The aggregate grant date fair value of the awards amounted to $360,000, which will be recognized as compensation expense over the vesting period. The Company recorded $60,000 of compensation expense during the three months ended August 31, 2013 with respect to this award. Total unrecognized compensation expense related to unvested stock awards at August 31, 2013 amounts to $300,000 and is expected to be recognized over a weighted average period of 0.8 years.

On June 21, 2013, the Company granted 1,500,000 shares of common stock to a consultant for services to be provided over a twelve month period, commencing June 1, 2013. The shares will vest after one year of service. In addition, the Company will pay the consultant a fee of $7,500 per month, cash flow permitting, over the same twelve month period. Accrued consulting fees at August 31, 2013 amounted to $22,500 related to the cash portion of fees due, which is included as a component of accounts payable and accrued expenses. Consulting fee expense amounted to $22,500 for the three months ended August 31, 2013.

13

BioPower Operations Corporation and Subsidiaries

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2013

Unaudited

A summary of the restricted stock award activity for the nine months ended August 31, 2013 is as follows:

	Number of Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value
Unvested - November 30, 2012	-	$	-	-	$	0
Granted	5,500,000		0.07
Vested	-		-
Unvested - August 31, 2013	5,500,000	$	0.07	0.8	$	0

Note 7. Related Party Transactions

The Company has separated accounts payable and accrued expenses on the balance sheet to reflect amounts due to related parties primarily consisting of officer compensation, health insurance, interest on notes and reimbursable expenses to officers for travel, meals and entertainment, vehicle and other related business expenses.

On June 12, 2013, the Company issued one of its directors 200,000 shares of its common stock in full satisfaction of director’s fees and consulting fees owed, amounting to $12,000.On the date of conversion, the fair value of the Company’s common stock was $0.06 per share, based on the closing price of the common stock. As of August 31, 2013, the 200,000 shares have not been issued and are included in common stock payable.

On June 21, 2013, the Company issued its Chief Executive Officer 894,900 shares of its common stock in full satisfaction of amounts due to him for reimbursable expenses, amounting to $53,694.On the date of conversion, the fair value of the Company’s common stock was $0.09 per share, based on the closing price of the common stock. The Company recorded a loss on the settlement of debt and accrued expenses of $26,847 during the three months ended August 31, 2013 as a result of the conversion.As of August 31, 2013, the 894,900 shares have not been issued and are included in common stock payable.

On June 21, 2013, the Company issued its Director of Business Strategy 1,000,000 shares of its common stock in full satisfaction of amounts due to her for reimbursable expenses, amounting to $60,000.On the date of conversion, the fair value of the Company’s common stock was $0.09 per share, based on the closing price of the common stock. The Company recorded a loss on the settlement of debt and accrued expenses of $30,000 during the three months ended August 31, 2013 as a result of the conversion.As of August 31, 2013, the 1,000,000 shares have not been issued and are included in common stock payable.

Note 8. Commitments and Contingencies

Employment Agreements – Officers and Directors

As of August 31, 2013, the Company has employment agreements with certain executives and directors (two individuals) containing the following provisions:

Term of contract	5 years, expiring on December 31, 2015
Salary	$200,000
Salary deferral	All salaries will be accrued, but may be paid from the Company’s available cash flow funds.

Leases

The Company’s lease on its office space expired on May 31, 2013. On June 3, 2013, the Company entered into a new lease agreement with its current landlord. The lease is for a 24 month period, expiring on May 31, 2015, and requires monthly base rental payments of $2,000 for the period from June 1, 2013 through May 31, 2014 and $2,080 for the period from June 1, 2014 through May 31, 2015.

14

BioPower Operations Corporation and Subsidiaries

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2013

Unaudited

Contingencies

From time to time, the Company may be involved in legal matters arising in the ordinary course of business. While the Company believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in litigation, will not have a material adverse effect on its business, financial condition or results of operations.

Note 9. Revenue – other

On February 13, 2012, the Company was engaged by a third party to provide consulting services in a three year contract for $60,000 per year plus a non-refundable $60,000 initial payment upon execution. The Company may earn fees in the form of cash or common stock of the third party, a public company, at their election. In lieu of cash payments for services to be rendered under the terms of the agreement, the third party elected to pay the Company 15,000,000 shares of public company restricted common stock, at a fifty percent discount using the preceding five days average trading price per the terms of the agreement. $120,000 was due upon execution of agreement. The fair value of the shares received upon the execution of this agreement was $253,500, as evidenced by the quoted closing trading price. The Company recorded the value of the shares received as deferred revenue totaling $120,000, which evidenced the fair value of the services to be performed and recorded a gain of $133,500, with a corresponding asset classified as available-for-sale securities. A gain was recorded since the value of the shares received was greater than the value of the services to be rendered upon the execution of the agreement.

In August 2012, the Company executed a loan agreement with a lender, who is also a shareholder, to obtain 10,000,000 free trading shares of the public company reference above. The shares received by the Company were sold during 2012. In exchange for the free trading shares, the Company was required to repay 10,500,000 shares in free trading stock of this public company. The 500,000 shares are deemed to be a loan cost, having a fair value of $6,250 ($0.0125/share), based upon the quoted closing trading price on the date of the agreement.

During 2012, the Company received 15,000,000 shares of the public company for services to be rendered and sold 10,000,000 shares as noted above based upon the ability to obtain the 10,000,000 shares of free trading stock from the lender. The 15,000,000 shares is currently held in escrow, of which 4,500,000 shares was to be released to the Company and the balance of the 10,500,000 shares will be paid to the shareholder for the 10,000,000 shares borrowed and the 500,000 shares for the loan cost as noted above upon the shares becoming unrestricted. The Company does not have any rights to the 10,500,000 shares. The Company has not recorded any asset or liability for the shares held in escrow. In May 2013, the Company was notified by the escrow agent that it would not release the shares to the Company. The Company has determined the value of the 4,500,000 shares to be impaired and has recorded an impairment charge of $76,050 during the nine months ended August 31, 2013 (see Note 2). Management has determined not to take further action on this matter.

The contract had the following remaining payment terms: 

⋅	$60,000 due on February 13, 2013; and
⋅	$60,000 due on February 13, 2014

As of August 31, 2013, the Company has not received the $60,000 due on February 13, 2013 under the contract. Collectability of this amount is not reasonably assured, therefore the Company has not recorded the related revenue, accounts receivable or deferred revenue associated with this amount as of August 31, 2013. Additionally, in May 2013, the Company was notified by the third party of its intent to terminate the agreement. Given this notification, the Company recognized the remaining portion of the deferred consulting revenue of $39,107 as consulting revenue in the accompanying statement of operations as of August 31, 2013.

Note 10. Testing Services Agreement

On July 2, 2013, the Company entered into agreements for the first stage of a project to develop a castor plantation and milling operation in the Republic of Paraguay with offshore entities (aka “Ambrosia” and “Developer”) for the testing and development of a project with up to $10,000,000 in financing upon certification of the castor yield effective. Under the terms of the Testing Services Agreement (the “TSA”), the Developer will provide the land, pay costs for the testing and pay the Company a monthly project management fee of $45,000 and reimbursement of expenses during the test period for subcontractors on the ground in Paraguay. The Company will provide project management testing services through the testing phase for up to 12 months until the successful certification of the yield from growing castor is proven, subject to material and adverse events. Once Ambrosia approves the project, then under the Castor Master Farm Management Services Agreement, the $10,000,000 to be invested from Ambrosia will go towards the development and operations of the first stage of the castor plantation and the building of the mill and its operations. The Company will earn 6% of the net income for ten years or have an option to become a 20% owner of the project. The Company began the initial test phase in Paraguay on March 20, 2013, and subject to the terms of the TSA, is entitled to project management fees. The Company recorded consulting revenue of $162,669 and $292,533 during the three and nine months ended August 31, 2013, respectively, in connection with services provided under the TSA.

15

BioPower Operations Corporation and Subsidiaries

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2013

Unaudited

Note 11. Investor Relations Agreement

On February 5, 2013, the Company entered into an investor relations agreement with a third party, pursuant to which the third party will provide certain investor relations services including, but not limited to, consulting and liaison services relating to the conception and implementation of its corporate and business development plan. The agreement is for a one-year term, commencing February 5, 2013 and is cancelable on a quarterly basis. In consideration for the services, the Company will issue 160,000 shares of common stock, to be delivered in four equal quarterly installments of 40,000 shares each. The first 40,000 shares were to be delivered upon execution of the agreement. In addition to the shares, the Company will pay the consultant $3,000 per month, in cash or stock, at the option of the Company. If the Company elects to pay the monthly fee in shares of the Company’s common stock, the number of shares to be issued will be calculated by dividing the fee owed by the closing price of the Company’s common stock.

On April 30, 2013, the Company entered into an amendment to the investor relations agreement, whereby the parties agreed to (i) amend the term of the agreement such that it would be a twelve month agreement commencing from April 8, 2013 and (ii) the Company would be required to pay the third party $2,000 per month, in cash or stock, at the option of the third party, commencing May 8, 2013.Additionally, the third party would still be entitled to the first 40,000 shares delivered upon execution of the original agreement and the $9,000 worth of common stock originally earned under the original agreement.

As of August 31, 2013, the Company was required to issue 80,000 shares of its common stock and determined to pay the first quarter’s fee of $9,000 in stock, representing 11,250 shares of the Company’s common stock. The fair value of the 91,250 shares of common stock to be issued to the third party was $48,000, based upon the quoted closing trading price of the Company’s common stock as of the date of grant. The Company has recorded this amount as a prepaid expense and is amortizing the expense over the service term. The third party has elected to receive the second quarter’s fee in cash. The Company recorded $6,200 and $51,333 during the three and nine months ended August 31, 2013, respectively, as professional fees. Since the 91,250 shares of common stock have not been issued to the third party as of August 31, 2013, the Company has included the value of the shares of $48,000 in common stock payable in the accompanying consolidated balance sheet and has not included these shares in the earnings per share calculations as of August 31, 2013.

Note 12. Fair Value of Financial Assets and Liabilities

The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value: 

· Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. 

· Level 2: Inputs reflect: quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

· Level 3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

The Company had assets measured at fair market value on a recurring basis. Consequently, the Company had gains and losses reported in the statement of comprehensive income (loss), that were attributable to the change in unrealized gains or losses relating to those assets still held at the reporting date for the period ended August 31, 2013. 

The following is the Company’s assets measured at fair value on a recurring basis at August 31, 2013 and November 30, 2012, using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3): 

	August 31, 2013		November 30, 2012
Level 1 – None	$	-	$	-
Level 2 – Marketable Securities		-		38,250
Level 3 – None		-		-
Total	$	-	$	38,250

16

BioPower Operations Corporation and Subsidiaries

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2013

Unaudited

See Note 2 regarding the impairment charge recognized during the nine months ended August 31, 2013 on the Company’s marketable securities.

The carrying amounts reported in the balance sheet for cash, available-for-sale securities, prepaid expenses, accounts payable and accrued expenses, notes payable, notes payable – related parties and convertible debt, approximate fair value based on the short-term nature of these instruments.

17

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

FORWARD LOOKING STATEMENTS AND ASSOCIATED RISK

The information contained in this Quarterly Report on Form 10-Q (this “Quarterly Report”) is intended to update the information contained in our Annual Report on Form 10-K for the year ended November 30, 2012 (our “2012 Annual Report”) and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in our 2012 Annual Report. The following discussion and analysis also should be read together with our consolidated financial statements and the notes to the consolidated financial statements included elsewhere in this Quarterly Report.

This discussion summarizes the significant factors affecting the consolidated operating results, financial condition and liquidity and cash flows of BioPower Operations Corp. for the three and nine months ended August 31, 2013 and 2012. Except for historical information, the matters discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result” and similar expressions. Forward-looking statements involve risks and uncertainties and are based upon judgments concerning various factors that are beyond our control. Forward-looking statements are based on current expectations and assumptions and actual results could differ materially from those projected in the forward-looking statements as a result of, among other things, those factors set forth in “Risk Factors” contained in Item 1A of our 2012 Annual Report.

Throughout this Quarterly Report, the terms “we,” “us” and “our” refers to BioPower Operations Corporation and, unless the context indicates otherwise, our subsidiaries in which we hold 100% of such entities’ outstanding equity securities, including BioPower Corporation (“BioPower Corporation”), Green Oil Plantations Americas Inc. (“Green Oil”) and Green Energy Crops Corporation (“GECC”), on a consolidated basis. Unless otherwise indicated, all monetary amounts are reflected in United States Dollars.

Overview

BioPower Operations Corporation ("we," "our," “BioPower”, “BIO” or the “Company") was incorporated in the State of Florida on September 13, 2010. On January 5, 2011, the Company re-domiciled to Nevada and formed BioPower Operations Corporation, a Nevada corporation. On January 6, 2011, the shareholders of BioPower Corporation contributed their shares of BioPower Corporation to BioPower Operations Corporation and BioPower Corporation became a wholly-owned subsidiary. The Company and its subsidiaries intend to grow biomass crops coupled with processing and/or conversion facilities to produce oils, biofuels, electricity and other biomass products. We also intend to utilize licensed patented technology to convert biomass wastes into products and reduce the amount of waste going to landfills through license, joint venture and build and own facilities. Further, we intend to license and create royalties by utilizing our FTZ Exchange subsidiary to help create exchanges.

We are a development stage company and have primarily generated revenues from a consulting agreement and from revenues earned from the testing phase in connection with the Testing Services Agreement in Paraguay (see below). Revenues recognized to date are not indicative of future expected revenues, once we begin marketing our fertilizer related products to customers. Accordingly, we must raise cash from other sources, such as from the proceeds of loans, sale of common shares, advances from related parties and consulting agreements.

From inception (September 13, 2010) to August 31, 2013, the Company’s business operations have been primarily focused on developing our business plan, developing potential products and biomass projects, becoming a trading public company through an S-1 registration statement, raising money, licensing technologies and licensing and developing on-line exchanges.

Our corporate headquarters are located at 1000 Corporate Drive, Suite 200, Fort Lauderdale, Florida 33334 and our phone number is (954) 202-6660. Our website can be found at www.biopowercorp.com. The information on our website is not incorporated in this report.

Our Business

Biomass is all plant and animal matter on the Earth's surface. Harvesting biomass such as crops, trees or dung and using it to generate energy such as heat, electricity or motion, is bioenergy. Biomass is a very broad term which is used to describe material of recent biological origin that can be used either as a source of energy or for its chemical components. As such, it includes trees, crops, algae and other plants, as well as agricultural and forest residues. It also includes many materials that are considered as wastes by our society including food and drink manufacturing effluents, sludge, manures, industrial (organic) by-products and the organic fraction of household waste.

Initially we developed a strategy to license and grow long-term biomass products that take five to seven years to reach maturation. After commencing development activities we recognized that the economic climate for lending and investment is focused on shorter term returns of two to three years. Therefore, BioPower analyzed various shorter term biomass technologies and market niche opportunities. As a result, we developed short term plans to produce and sell biomass products which we call our Castor project. We have deferred our plans for the development of our long-term, licensed biomass products until specific funding can be obtained for such projects. 

18

BioPower intends to create a special purpose entity (“SPE”) company for each biomass project. Every SPE must have a sustainable, biomass growing project with facilities to process the biomass into saleable products possibly coupled with an end use agreement. This end use agreement may enable the SPE to obtain financing based upon the potential profitability of each project. The Company intends to offer ownership in our initial SPEs to partners who can provide land and money. The role BioPower will fulfill in each SPE is executive and general management, procurement of funding and development of markets for the sale of biomass and biomass products. The initial focus for biomass business opportunities will be in the United States of America, the Caribbean, South America and Central America.

The Company also intends to investigate and license and/or joint venture with the most promising, emerging biomass products and processes.

Castor Project

The Company has begun the process to obtain financing for a castor plantation and milling operation to supply castor oil to the U.S.A. and/or international marketplace. We have located a hybrid seed that should result in high yields per acre. We have identified unique growing protocols that also may enhance the yield of seed thus oil by weight. We have identified engineering firms to prepare both general and site specific engineering for permitting and construction purposes. We have identified the mill equipment to process the seed into oil and the agricultural equipment required to facilitate the growing protocols that have been identified. We are currently working on the development of a long-term (greater than one year) purchase agreement for the sale of castor oil. Although we have discussed various potential sites in the center of Florida, we have not made a final determination of the specific location.

The U.S.A. currently imports almost 100% of the castor oil used as a feedstock into the personal care, pharmaceuticals, polymers and plastics, adhesives, coatings and other specialty chemical markets. The Company proposes to develop a project in Florida to grow proven hybrid castor which can be harvested within 110 days per crop. Given the rainfall, the temperature profile and the nature of the soil, it is anticipated that the land when developed will produce 2.6 to 3.0 metric tons of oil seeds per acre based on two crops per year. We will process the seeds into oil (43% of seed weight) with our own, vertically integrated mill which we consider critical to this project. Based on our ability to obtain financing in this fiscal year, we hope to realize revenues and profits from this operation during the latter half of 2013.

On July 2, 2013, we entered into agreements for the first stage of a project to develop a castor plantation and milling operation in the Republic of Paraguay with offshore entities (aka “Ambrosia and “Developer”) for the testing and development of a project with up to $10,000,000 in financing upon certification of the castor yield effective. Under the terms of the Testing Services Agreement, the Developer will provide the land, pay costs for the testing and pay us a monthly project management fee of $45,000 and reimbursement of expenses during the test period for subcontractors on the ground in Paraguay. We will provide project management testing services through the testing phase for up to 12 months until the successful certification of the yield from growing castor is proven, subject to material and adverse events. Once Ambrosia approves the project, then under the Castor Master Farm Management Services Agreement, the $10,000,000 to be invested from Ambrosia will go towards the development and operations of the first stage of the castor plantation and the building of the mill and its operations. We will earn 6% of the net income for ten years or have an option to become a 20% owner of the project. We began the initial test phase in Paraguay and have earned approximately $293,000 in project management fees as of August 31, 2013. The first stage of the project encompasses approximately 1681 hectares or 4,154 acres of land.

Licensed Technology

We recently announced that we obtained a non-exclusive global license from AGT Technologies LLC (“AGT”) until June 2029 when the patent expires. The license is for the patented one-step enzyme technology which converts wastes from poultry, hogs, humans and sugar to products such as, fertilizer, ethanol and other products.

BioPower intends to focus initially on municipalities who have a significant need to reduce their costs of the handling of sewage by utilizing the Company's licensed technology to reduce landfill costs by converting a portion of the sewage into products that do not have to go to the landfill but can be used for energy and fertilizer. The utilization of biomass residues is of paramount importance to achieve environmental sustainability by harnessing the potential of renewable resources in the production of clean energy and value added products. The Company will also target Fortune 500 companies that seek solutions for their waste sugars.

We are required to pay AGT 50% of any sub-license fees that we receive. We are also required to pay AGT 12% in royalties on all revenues we earn from utilizing the technology. As of August 31, 2013, no amounts are due under the license agreement.

The patented technology is a one-step platform that integrates enzymatic fermentation process that requires no pretreatment of the feedstock before fermentation. During the fermentation process the bacteria within the wastes are inactivated by the injected proprietary microbes that also hydrolyze natural biopolymers and simultaneously convert the hydrolyzed fermentable sugars into ethanol.

The process can also convert human waste which is reduced from the conversion of it to ethanol and CO2. Once commercialized, BioPower believes that the process will allow sewage treatment plants to reduce or entirely eliminate their sludge volumes and create saleable Class A fertilizer in lieu of delivering pressed sludge to a landfill in an environmentally unsound method. The process allows farmers to utilize the bacteria free solids to be sold and utilized as an environmentally safe soil amendment or fertilizer. Savings result from less energy used in the processing of sludge, elimination of the hauling costs of treated sludge, and the added profit from ethanol and fertilizer sales. Water utilized in the fermentation stage is recycled back into the process minimizing waste streams from the process.

19

Critical Accounting Policies

In response to financial reporting release FR-60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies, from the SEC, we have selected our more subjective accounting estimation processes for purposes of explaining the methodology used in calculating the estimate, in addition to the inherent uncertainties pertaining to the estimate and the possible effects on the our financial condition. The accounting estimates involve certain assumptions that, if incorrect, could have a material adverse impact on our results of operations and financial condition. Our more significant accounting policies can be found in Note 2 of our unaudited interim consolidated financial statements found elsewhere in this report and in our Annual Report on Form 10-K for the year ended November 30, 2012, as filed with the SEC. There have been no material changes to our critical accounting policies during the period covered by this report.

Results of Operations

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect that we will require additional capital to meet our operating requirements. We expect to raise additional capital through, among other things, the sale of equity and/or debt securities.

Three and Nine Months Ended August 31, 2013 Compared to the Three and Nine Months Ended August 31, 2012

The following tables set forth, for the periods indicated, results of operations information from our unaudited interim consolidated financial statements:  

	Three Months Ended August 31,				Change		Change
	2013		2012		(Dollars)		(Percentage)
Expenses
General and administrative expenses	$	351,326	$	247,790	$	103,536	41.8	%
Other Income (Expense)
Interest expense		(942)		(34,546)		(33,604)	-97.3	%
Interest expense - related party		1		(343)		(344)	-100.0	%
Loss on settlement of debt		(190,921)		-		190,921	100.0	%
Loss on sale of available-for-sale marketable securities		-		(32,038)		(32,038)	-100.0	%
Loan cost		-		(6,250)		(6,250)	-100.0	%
Consulting revenue		168,674		20,000		148,674	743.4	%
Consulting expense		(87,217)		-		87,217	100.0	%
Total Other Expense - net		(110,405)		(53,177)		57,228	107.6	%
Net loss	$	(461,731)	$	(300,967)	$	160,764	53.4	%

20

	Nine Months Ended August 31,				Change		Change
	2013		2012		(Dollars)		(Percentage)
Expenses
General and administrative expenses	$	753,469	$	800,641	$	(47,172)	-5.9	%
Other Income (Expense)
Interest expense		(30,809)		(119,074)		(88,265)	-74.1	%
Interest expense - related party		(807)		(545)		262	48.1	%
Loss on settlement of debt		(190,921)		-		190,921	100.0	%
Loss on impairment of available-for-sale securities		(76,050)		-		76,050	100.0	%
Loss on sale of available-for-sale marketable securities		-		(32,038)		(32,038)	-100.0	%
Loan cost		-		(6,250)		(6,250)	-100.0	%
Gain on settlement of consulting revenue receivable		-		133,500		(133,500)	-100.0	%
Consulting revenue		354,967		43,571		311,396	714.7	%
Consulting expense		(170,664)		-		170,664	100.0	%
Total Other Expense - net		(114,284)		19,164		133,448	696.3	%
Net loss	$	(867,753)	$	(781,477)	$	86,276	11.0	%

General and Administrative Expenses. Our general and administrative expenses are mainly comprised of compensation expense, corporate overhead, development costs, and financial and administrative contracted services for professional services including legal and accounting, SEC filing fees, and insurance. The increase in our general and administrative expenses for the three months ended August 31, 2013 is primarily attributable to stock-based compensation expense of $60,000 related to the 4,000,000 shares granted in June 2013 to our CEO and Director of Business Strategy, as well as increased compensation expense due to the hiring of our Chief Technology Officer in June 2013 and increased professional and consulting fees. The increase in general and administrative expenses for the three months ended August 31, 2013 was offset by the decrease in insurance expense as a result of not renewing our directors’ and officers’ liability insurance. The decrease in our general and administrative expenses for the nine months ended August 31, 2013, compared to the nine months ended August 31, 2012 is primarily attributable to lower compensation expense due to the departure of our former President/Chief Operating Officer in August 2012, as well as lower professional and consulting fees. Additionally, insurance expense decreased during the nine months ended August 31, 2013 as a result of not renewing our directors’ and officers’ liability insurance. The decrease in general and administrative expenses for the nine months ended August 31, 2013 was offset by the stock-based compensation expense recorded in connection with the shares granted to our CEO and Director of Business Strategy.

Interest Expense. Interest expense for the three and nine months ended August 31, 2013 and 2012 primarily represents the accretion of debt discount to interest expense on our outstanding debt, as well as contractual interest expense on our notes payable and convertible debt.

Loss on settlement of debt. During the three and nine months ended August 31, 2013, we recognized a loss of $190,921 due to the conversions and settlements of notes, convertible notes and accrued expenses.

Loss on impairment. The Company previously reported certain shares due to them by an escrow agent as available-for-sale securities. In May 2013, the Company was notified by the escrow agent that it would not release these shares. Accordingly, the Company determined the value of the available-for-sale securities to be impaired and recorded an impairment charge of $76,050 as of August 31, 2013.

Consulting Revenue. During the three months ended August 31, 2013 and 2012, the Company recognized $0 and $20,000, respectively, in consulting revenue related to the consulting agreement entered into with a third party in February 2012. During the nine months ended August 31, 2013 and 2012, the Company recognized $56,429 and $43,571, respectively, in consulting revenue related to this same agreement. During the three and nine months ended August 31, 2013, the Company recognized $162,669 and $292,533, respectively, in consulting revenue related to our Testing Services Agreement entered into to develop a castor plantation and milling operation in Paraguay.

Consulting expense. Consulting expense represents our cost to provide services under the Testing Services Agreement to develop a castor plantation and milling operation in Paraguay. These costs are mainly comprised of third party outsourcing expenses and certain reimbursable expenses. During the three and nine months ended August 31, 2013, we recognized $87,217 and $170,664, respectively, in consulting expense.

Loss on sale of available-for-sale marketable securities. The Company recognized a loss on the sale of available-for-sale securities of $32,038 during the three months ended August 31, 2012 in connection with the sale of 2,436,000 shares of common stock.

Loan Cost. During the three months ended August 31, 2012, we recognized $6,250 in loan costs related to the loan agreement entered into with a third party lender in August 2012.

21

 

Gain on Settlement of Consulting Revenue Receivable. In February 2012, the Company entered into a consulting agreement with a third party, pursuant to which we received 15,000,000 shares of the third party’s restricted common stock as payment for services to be rendered by us. As of August 31, 2012, the value of the shares received was $253,500, of which $120,000 was recorded as deferred revenue and $133,500 was recorded as gain on settlement of consulting revenue receivable.

Liquidity and Financial Condition

	Nine Months Ended
	August 31,
Category	2013		2012
Net cash used in operating activities	$	(185,779)	$	(207,556)
Net cash provided by investing activities		-		11,330
Net cash provided by financing activities		219,406		194,292
Net increase (decrease) in cash	$	33,627	$	(1,934)

Cash Flows from Operating Activities

Net cash used in operating activities was $185,779 for the nine months ended August 31, 2013, compared to $207,556 for the comparable period in 2012. Net cash used in operating activities for the nine months ended August 31, 2013 is mainly attributable to our net loss of $867,753, offset by the loss on settlement of debt of $190,921, loss on impairment of securities of $76,050, stock-based compensation expense of $60,000, amortization of stock to be issued for services rendered of $51,333, amortization of debt discount of $25,000, and an overall increase in working capital of $274,243, mainly comprised of an increase in accounts payable and accrued expenses due to related parties of $310,830. Net cash used in operating activities for the nine months ended August 31, 2012 is mainly attributable to our net loss of $781,477, available for sale securities received as consideration for consulting revenue of $120,000 and gain on the sale of consulting revenue receivable of $133,500. Offsetting these amounts was the amortization of debt discount of $116,429 and an overall increase working capital of $664,764.

Cash Flows from Investing Activities

Net cash provided by investing activities for the nine months ended August 31, 2012 is attributable to the proceeds from the sale of available-for-sale securities of $11,330 received by the Company.

Cash Flows from Financing Activities

We have financed our operations primarily from either advancements or the issuance of equity and debt instruments. For the nine months ended August 31, 2013, cash flows provided by financing activities was $219,406, compared to $194,292 for the comparable period in 2012. We received $206,506 in proceeds from convertible debt and notes payable with third parties and $12,900 in proceeds from common stock to be issued during the nine months ended August 31, 2013, compared to $102,000 in proceeds from convertible debt and notes payable with third parties, $42,092 in proceeds from notes payable with related parties, and $50,200 in proceeds from common stock to be issued during the nine months ended August 31, 2012. Management is seeking, and expects to continue to seek to raise additional capital through equity and/or debt financings, including through one or more equity or debt financings to fund its operations, and pay amounts due to its creditors and employees. However, there can be no assurance that the Company will be able to raise such additional equity or debt financing or obtain such bank borrowings on terms satisfactory to the Company or at all.

The Company does not currently have sufficient resources to cover on-going expenses and expansion. As of August 31, 2013, the Company had cash of $50,583 and current liabilities of $2,344,577. Our current liabilities include accounts payable and accrued expenses to related parties of $938,551. Our operations used $747,489 in cash since inception in September 2010. We have historically financed our operations primarily through private placements of common stock, loans from third parties and loans from our Officer. We plan on raising additional funds from investors to implement our business model. In the event we are unsuccessful, this will have a negative impact on our operations. 

As reflected in the accompanying unaudited interim consolidated financial statements, the Company has a net loss of $867,753 and net cash used in operations of $185,779 for the nine months ended August 31, 2013; and a working capital deficit of $2,260,186 and a deficit accumulated during the development stage of $3,112,190 at August 31, 2013. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern is dependent on Management's plans, which include potential asset acquisitions, mergers or business combinations with other entities, further implementation of its business plan and continuing to raise funds through debt and/or equity financings. The Company will likely rely upon related party debt and/or equity financing in order to ensure the continuing existence of the business. The financial statements have been prepared assuming that we will continue as a going concern, which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.

22

Recent Accounting Pronouncements

See Note 2 to our unaudited interim consolidated financial statements regarding recent accounting pronouncements.

Off-Balance Sheet Arrangements

As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

This item is not applicable to smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of August 31, 2013, the end of the period covered by this report. Based on, and as of the date of such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as August 31, 2013 such that the information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

Other than the material weakness discussed below that was identified and remediated, there have not been any significant changes in our internal control over financial reporting during the fiscal quarter ended August 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Remediation of a Material Weakness in Internal Control Over Financial Reporting

We recognize the importance of the control environment as it sets the overall tone for the organization and is the foundation for all other components of internal control. Consequently, we designed and implemented remediation measures to address the material weakness identified as of November 30, 2012 and enhance our internal control over financial reporting. The material weakness related to the lack of technical resources to apply accounting requirements as they relate to non-routine and highly complex transactions and resulted in restatements to our financial statements which were filed on Form 10-Q for the periods ended February 29, May 31 and August 31, 2012. The following actions, which we believe remediated the material weakness in internal control over financial reporting, were completed as of the date of this filing:

⋅ We retained accounting and consulting personnel with the appropriate level of knowledge, skills and experience in financial accounting and reporting;

⋅ We have examined significant accounts and improved related account reconciliations; and

⋅ We changed our monitoring practices concerning the review of significant accounts and transactions and related financial results and reporting.

We are committed to a strong internal control environment and will continue to review the effectiveness of our internal controls over financial reporting and other disclosure controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, management may determine to take additional measures.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we are a party to, or otherwise involved in, legal proceedings arising in the normal and ordinary course of business. As of the date of this report, we are not aware of any proceeding, threatened or pending, against us which, if determined adversely, would have a material effect on our business, results of operations, cash flows or financial position.

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

None.

23

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

24

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

The following exhibits are being filed as part of this Quarterly Report on Form 10-Q. 

Exhibit
Number	Exhibit Description
31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d- 14(a)
32.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d- 14(b) and 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 Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* To be filed by amendment on Form 10-Q.

Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our shareholders who make a written request to BioPower Operations Corp., 1000 Corporate Drive, Suite 200, Fort Lauderdale, Florida 33334 Attention: Mr. Robert Kohn.

25

SIGNATURES 

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

Dated: October 21, 2013	BioPower Operations Corporation
	By:	/s/ Robert D. Kohn
		Robert D. Kohn, Chairman and Chief Executive Officer and Chief Financial Officer

26