UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
 
 FORM
10-Q
 
 (Mark
One)
 |X|
              QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For
      the quarterly period ended September 30,
      2008
  |   |
              TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For
      the Quarterly Period Ended September 30,
2008
  Commission
File Number: 000-52337
  BALQON
CORPORATION
 (Exact
name of registrant as specified in its charter)
 
 Nevada
                
                (State
      or other jurisdiction
                of
      incorporation or organization)
              33-0989901
                
                (I.R.S.
      Employer
                Identification
      No.)
  1701
E. Edinger, Unit E-3, Santa Ana, California, 92705
 (Address
of principal executive offices) (Zip Code)
  (714)
836-6342
 (Registrant’s
telephone number, including area code)
  Not
Applicable
 (Former
name, former address and former fiscal year, if changed since last
report)
  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 S 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 S
  As of
November 14, 2008, there were 25,308,348 shares of the issuer’s common
stock issued and outstanding.
  
 
 CAUTIONARY
STATEMENT
  All statements included or incorporated
by reference in this Quarterly Report on Form 10-Q, other than statements or
characterizations of historical fact, are “forward-looking statements.” Examples
of forward-looking statements include, but are not limited to, statements
concerning projected net sales, costs and expenses and gross margins; our
accounting estimates, assumptions and judgments; the demand for our products;
the competitive nature of and anticipated growth in our industry; and our
prospective needs for additional capital. These forward-looking statements are
based on our current expectations, estimates, approximations and projections
about our industry and business, management’s beliefs, and certain assumptions
made by us, all of which are subject to change. Forward-looking statements can
often be identified by such words as “anticipates,” “expects,” “intends,”
“plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,”
“would,” “could,” “potential,” “continue,” “ongoing,” similar expressions and
variations or negatives of these words. These statements are not guarantees of
future performance and are subject to risks, uncertainties and assumptions that
are difficult to predict. Therefore, our actual results could differ materially
and adversely from those expressed in any forward-looking statements as a result
of various factors, some of which are set forth in the “Risk Factors” section of
our Current Report on Form 8-K for October 24, 2008 filed with the
Securities and Exchange Commission, or SEC, on October 30, 2008, which
could cause our financial results, including our net income or loss or growth in
net income or loss to differ materially from prior results, which in turn could,
among other things, cause the price of our common stock to fluctuate
substantially. These forward-looking statements speak only as of the date of
this report. We undertake no obligation to revise or update publicly any
forward-looking statement for any reason, except as otherwise required by
law.
 i
  TABLE
OF CONTENTS
    PagePART
      I

                  FINANCIAL
      INFORMATIONItem 1.
                Financial
      Statements
                1Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                19Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                27Item
      4.
                Controls
      and Procedures
                27Item
      4T.
                Controls
      and Procedures
                27PART
      II

                  OTHER
      INFORMATIONItem
      1
                Legal
      Proceedings
                28Item
      1A
                Risk
      Factors
                28Item
      2
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                28Item
      3
                Defaults
      Upon Senior Securities
                28Item
      4
                Submission
      of Matters to a Vote of Security Holders
                28Item
      5
                Other
      Information
                28Item
      6
                Exhibits
                29Exhibits
      Filed with this Report
  ii
 
  PART
I – FINANCIAL INFORMATION
 ITEM
      1.
              FINANCIAL
      STATEMENTS
  BALQON
CORPORATION
 CONDENSED
BALANCE SHEETS
  September 30,
                    2008
                    (Unaudited)
                
                
                December
      31,
                    2007ASSETSCurrent
      assetsCash
                
                $
                543,192
                
                
                $
                34Accounts
      receivable
                
                
                —
                
                
                
                35,000Inventories
                
                
                106,159
                
                
                
                —Costs
      in excess of billings and estimated earningson
      uncompleted contracts
                
                
                7,098
                
                
                
                —Prepaid
      expenses
                
                
                1,534
                
                
                
                —Total
      current assets
                
                
                657,983
                
                
                
                35,034Property
      and equipment, net
                
                
                79,538
                
                
                
                21,047Intangible
      assets
                
                
                353,465
                
                
                
                —Deposits
                
                
                33,641
                
                
                
                19,241Total
      assets
                
                $
                1,124,627
                
                
                $
                75,322LIABILITIES
      AND SHAREHOLDERS’ DEFICIENCYCurrent
      liabilitiesAccounts
      payable and accrued expenses
                
                $
                417,046
                
                
                $
                29,212Convertible promissory
      notes
                
                
                1,310,000
                
                
                
                —Notes
      payable to related parties, unsecured
                
                
                125,875
                
                
                
                —Advances
      from shareholder
                
                
                47,877
                
                
                
                57,420Billings
      in excess of costs and estimated earningson
      uncompleted contracts
                
                
                —
                
                
                
                71,264Total
      current liabilities
                
                
                1,900,798
                
                
                
                157,896SHAREHOLDERS’
      DEFICIENCYCommon
      stock, no par value, 100,000,000 shares authorized,18,067,000
      shares issued and outstanding
                
                
                5,000
                
                
                
                5,000Common
      stock to be issued, 5,333,000 shares
                
                
                77,596
                
                
                
                —Accumulated
      deficit
                
                
                (858,767
                )
                
                
                (87,574
                )Total
      shareholders’ deficiency
                
                
                (776,171
                )
                
                
                (82,574
                )Total
      liabilities and shareholders’ deficiency
                
                $
                1,124,627
                
                
                $
                75,322
  The accompanying notes are
an integral part of these condensed financial statements.
  1
  BALQON
CORPORATION
 CONDENSED
STATEMENTS OF OPERATIONS
 FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(Unaudited)
  Three
      Months Ended
                    September
      30,
                
                
                Nine
      Months Ended
                    September
      30,2008
                
                
                2007
                
                
                2008
                
                
                2007REVENUES:Contract
      revenue earned
                
                $
                10,787
                
                
                $
                188,752
                
                
                $
                138,362
                
                
                $
                230,898Sale
      of parts
                
                
                —
                
                
                
                —
                
                
                
                75,000
                
                
                
                —Total
      revenues
                
                
                10,787
                
                
                
                188,752
                
                
                
                213,362
                
                
                
                230,898Total
      cost of revenues
                
                
                17,361
                
                
                
                107,695
                
                
                
                170,292
                
                
                
                138,557Gross
      (loss) profit
                
                
                (6,574
                )
                
                
                81,057
                
                
                
                43,070
                
                
                
                92,341OPERATING
      EXPENSES:General
      and administrative
                
                
                119,913
                
                
                
                98,829
                
                
                
                363,338
                
                
                
                137,412Reverse
      merger expenses
                
                
                429,300
                
                
                
                —
                
                
                
                429,300
                
                
                
                —Depreciation
      and amortization
                
                
                2,693
                
                
                
                895
                
                
                
                6,370
                
                
                
                1,279Total
      operating expenses
                
                
                551,906
                
                
                
                99,724
                
                
                
                799,008
                
                
                
                138,691Loss
      from operations
                
                
                (558,480
                )
                
                
                (18,667
                )
                
                
                (755,938
                )
                
                
                (46,350
                )Other
      income (expense)Interest
      expense
                
                
                (15,255
                )
                
                
                —
                
                
                
                (15,225
                )
                
                
                —NET
      LOSS:
                
                $
                (573,735
                )
                
                $
                (18,667
                )
                
                $
                (771,193
                )
                
                $
                (46,350
                )Net
      loss per share-basic and diluted
                
                $
                (0.02
                )
                
                $
                (0.00
                )
                
                $
                (0.04
                )
                
                $
                (0.04
                )Weighted
      average shares outstanding, basic and diluted
                
                
                21,263,232
                
                
                
                16,667,000
                
                
                
                18,699,087
                
                
                
                16,667,000
 The
accompanying notes are an integral part of these condensed financial
statements.
 
 2
  BALQON
CORPORATION
 CONDENSED
STATEMENT OF SHAREHOLDERS’ DEFICIENCY
 FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 (Unaudited)
  Common
      StockNumber
                
                
                Amount
                
                
                Common
      Stock
                    to
      be Issued
                
                
                Accumulated
                    Deficit
                
                
                TotalBalance,
      December 31, 2007
                
                
                16,667,000
                
                
                $
                5,000
                
                
                $
                —
                
                
                $
                (87,574
                )
                
                $
                (82,574
                )Effect
      of revenue merger transaction
                
                
                1,400,000
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Fair
      value of 5,333,000 shares granted for services
                
                
                —
                
                
                
                —
                
                
                
                77,596
                
                
                
                —
                
                
                
                77,596Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (771,193
                )
                
                
                (771,193
                )Balance,
      September 30, 2008 (unaudited)
                
                
                18,067,000
                
                
                $
                5,000
                
                
                $
                77,596
                
                
                $
                (858,767
                )
                
                $
                (776,171
                )
 The
accompanying notes are an integral part of these condensed financial
statements.
 3
  BALQON
CORPORATION
 CONDENSED
STATEMENTS OF CASH FLOWS
 FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 (Unaudited)
  Nine
      Months Ended
                    September 30,
                    2008
                
                
                Nine
      Months Ended
                    September 30,
                    2007Cash
      flow from operating activities:Net
      loss
                
                $
                (771,193
                )
                
                $
                (46,350
                )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activitiesDepreciation
      and amortization
                
                
                6,370
                
                
                
                1,279Fair
      value of common stock granted for services
                
                
                77,596
                
                
                
                —Changes
      in operating assets and liabilitiesAccounts
      receivable
                
                
                35,000
                
                
                
                (50,000
                )Inventories
                
                
                (106,159
                )
                
                
                —Costs
      in excess of billings on uncompleted contracts
                
                
                (7,098
                )
                
                
                —Prepaid
      Expenses
                
                
                (1,534
                )
                
                
                —Deposits
                
                
                (14,400
                )
                
                
                (19,241
                )Accounts
      payable and accrued expense
                
                
                387,834
                
                
                
                11,155Billings
      in excess of costs and estimated earnings on uncompleted
      contracts
                
                
                (71,264
                )
                
                
                163,102Net
      cash provided by (used in) operating activities
                
                
                (464,848
                )
                
                
                59,945Cash
      flows from investing activities:Acquisition
      of furniture, equipment and software
                
                
                (64,860
                )
                
                
                (22,316
                )Acquisition
      of intellectual property
                
                
                (353,465
                )
                
                
                —Net
      cash used in investing activities
                
                
                (418,325
                )
                
                
                (22,316
                )Cash
      flows from financing activities:Proceeds
      from notes payable, related parties
                
                
                125,875
                
                
                
                —Proceeds
      from convertible promissory notes
                
                
                1,310,000
                
                
                
                —Advances
      from shareholder
                
                
                (9,544
                )
                
                
                18,364Net
      cash provided by financing activities
                
                
                1,426,331
                
                
                
                18,364Increase
      in cash and cash equivalents
                
                
                543,158
                
                
                
                55,993Cash
      and cash equivalents, beginning of period
                
                
                34
                
                
                
                —Cash
      and cash equivalents, end of period
                
                $
                543,192
                
                
                $
                55,993Supplemental
      cash flow informationInterest
      Paid
                
                $
                —
                
                
                $
                —Income
      taxes Paid
                
                $
                —
                
                
                $
                —
 The accompanying notes are
an integral part of these condensed financial statements.
  4
 BALQON
CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER
30, 2008
 NOTE
1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
  The
Company
  Balqon
Corporation (the “Company”) was incorporated on April 21, 2005 as a California
corporation and commenced business operations in 2006. The Company is involved
in research, development and commercialization of technologies for heavy-duty
electric vehicles used in off-highway applications.
  On July
11, 2008, the Company signed a term sheet in which the Company agreed to merge
with BMR Solutions, Inc., a Nevada corporation (“BMR”).  On October
24, 2008, the Company completed the merger with BMR.  Pursuant to the
merger agreement, the issued and outstanding common shares of the Company were
exchanged on a one-for-one basis for common shares of BMR.  After the
merger was completed, Balqon’s shareholders own approximately 94% of the
outstanding shares of common stock of BMR and the original shareholders of BMR
own approximately 6% of the outstanding shares of common stock of BMR, not
including warrants.  The transaction was accounted for as a reverse
merger (recapitalization) with Balqon deemed to be the accounting acquirer and
BMR deemed to be the legal acquirer.  The financial statements
presented herein are those of the accounting acquirer given the effect of the
issuance of 1,400,000 shares of common stock upon completion of the transaction
and reflecting the net liabilities assumed of BMR of $80,964 as a cost of the
reverse merger had it occurred as of September 30, 2008.  In addition,
the Company incurred expenses of $348,336 in connection with the reverse
merger.
  Going
Concern
  For the
nine months ended September 30, 2008 and for the year ended December 31,
2007, the Company recorded net losses of $771,193 and $82,744, respectively, and
had an accumulated deficit of $858,767 at September 30,
2008.  These matters 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 this
uncertainty.  The Company intends to raise funds to finance operations
until the Company achieves profitable operations. The Company’s capital
requirements for the next 12 months, as they relate to the production of its
products will continue to be significant.  If adequate funds are not
available to satisfy either medium or long-term capital requirements, the
Company’s operations and liquidity could be materially adversely affected and
the Company could be forced to cut back its operations.  Subsequent to
September 30, 2008, the Company received $500,000 from the issuance of its
common stock (see Note 11).
  Basis
of Presentation of Unaudited Financial Information
  The unaudited financial
statements of the Company for the three and nine months ended September 30,
2008 and September 30, 2007 have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information and pursuant to the requirements for reporting on
Form 10-Q and Regulation S-K for scaled disclosures for smaller reporting
companies.  Accordingly, they do not include all the information and
footnotes required by accounting principles generally accepted in United States
of America for complete financial statements.  However, such
information reflects all adjustments (consisting solely of normal recurring
adjustments), which are, in the opinion of management, necessary for the fair
presentation of the consolidated financial position and the
consolidated results of operations. Results shown for interim periods are not
necessarily indicative of the results to be obtained for a full fiscal
year.  The condensed balance sheet information as of December 31, 2007
was derived from the audited financial statements included in the Company's
financial statements as of and for the years ended December 31, 2007 and 2006
included in Form 8-K filed with the SEC on October 30, 2008. These interim
financial statements should be read in conjunction with that
report.
  5
 BALQON
CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER
30, 2008
 NOTE
1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
  Estimates
  The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.  Material estimates relate to the recognition of
contract revenues and estimated costs to complete contracts in process, and
recoverability of reported amounts of long-lived assets.  Actual
results may differ from those estimates.
  Revenues
  Contract
Revenue and Cost Recognition
  In
accounting for contracts, the Company follows the provisions of the AICPA’s
Statement of Position 81-1 – Accounting for Performance of
Construction-Type and Certain Production-Type Contracts (“SOP
81-1”).  The Company recognizes revenues using the
percentage-of-completion method of accounting by relating contract costs
incurred to date to the total estimated costs at completion.  This
method is used because management considers costs to be the best available
measure of progress on its contracts.  Contract losses are provided
for in their entirety in the period that they become known, without regard to
the percentage-of-completion.  We also recognize as revenues costs
associated with claims and unapproved change orders to the extent it is probable
that such claims and change orders will result in additional contract revenue,
and the amount of such additional revenue can be reliably
estimated.
  Contract
costs include all direct material and labor costs.  The liability
“Billings in excess of costs and estimated earnings on uncompleted contracts”
represents billings in excess of revenues earned.
  Sales
of Parts Revenue
  The
Company recognizes revenue from sales of parts when there is persuasive evidence
that an arrangement exists, delivery of the product has occurred and title has
passed, the selling price is both fixed and determinable, and collectibility is
reasonably assured, all of which generally occurs upon shipment of the Company’s
product or delivery of the product to the destination specified by the
customer.
  Cash
and Cash Equivalents
  The
Company considers all highly liquid instruments with maturity of three months or
less at the time of issuance to be cash equivalents.
  6
 BALQON
CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER
30, 2008
 NOTE
1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
  Accounts
Receivable
  Trade
receivables are recorded at net realizable value consisting of the carrying
amount less an allowance for uncollectible accounts, as needed.
  The
Company uses the allowance method to account for uncollectible trade receivable
balances. Under the allowance method, if needed, an estimate of uncollectible
customer balances is made based upon specific account balances that are
considered uncollectible. Factors used to establish an allowance include the
credit quality and payment history of the customer.  At
September 30, 2008 and December 31, 2007, there was no allowance for
doubtful accounts.
  Inventories
  Inventories
are stated at the lower of cost or market. Cost is determined principally on a
first-in-first-out average cost basis.  Inventories consist of the
following:
 
 September
      30,
                    2008
                    (unaudited)Raw
      materials
                
                $
                97,197Work
      in process
                
                
                8,962$
                106,159
  Property
and Equipment
  Property
and equipment are stated at cost. The cost of property and equipment is
depreciated on the straight-line method over the following estimated useful
lives:
   Computer equipment
      and software
                3 yearsFurniture
                3 yearsMachinery
                3
  years
  Leasehold
improvements are amortized using the straight-line method over the shorter of
the estimated useful life of the asset or the lease term.
  Long-lived
Assets
  The
Company accounts for the impairment and disposition of long-lived assets in
accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets.”  In
accordance with SFAS No. 144, long-lived assets to be held are reviewed for
events or changes in circumstances that indicate that their carrying value may
not be recoverable. The Company periodically reviews the carrying value of
long-lived assets to determine whether or not impairment to such value has
occurred.  Based on management’s assessments, no impairments were
recorded during the nine month periods ended September 30, 2008 and
2007.
  7
 BALQON
CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER
30, 2008
 NOTE
1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
  Income
Taxes
  The
Company accounts for income taxes in accordance with SFAS No. 109, “Accounting
for Income Taxes.” Under SFAS No. 109, income taxes are recognized for the
amount of taxes payable or refundable for the current year and deferred tax
liabilities and assets are recognized for the future tax consequences of
transactions that have been recognized in the Company’s financial statements or
tax returns. A valuation allowance is provided when it is more likely than not
that some portion or the entire deferred tax asset will not be
realized.
  Loss
Per Share
  Basic
loss per share has been computed using the weighted average number of common
shares outstanding and issuable during the period. The computation of basic loss
per share excludes the 1,400,000 shares issued in connection with the reverse
merger (see Note 1.)  Diluted loss per share is computed based on
the weighted average number of common shares and all common equivalent shares
outstanding during the period in which they are dilutive. Common equivalent
shares consist of shares issuable upon the exercise of stock options or
warrants. As of September 30, 2008 common stock equivalents composed of options
exercisable into 4,562,592 shares of the Company’s common stock and warrants
exercisable into 2,039,180 shares of the Company’s common stock. For the three
and nine month periods ended September 30, 2008 and 2007, common equivalent
shares have been excluded from the calculation of loss per share as their effect
is anti-dilutive.
  Stock-Based
Compensation
  The
Company periodically issues stock purchase options to employees and
non-employees in non-capital raising transactions for services
rendered,  for financing costs and on a merit basis. Stock purchase
options issued to nonemployees are issued as warrants with the warrants sharing
the same vesting and exercise attributes of the company’s stock purchase options
issued to employees.
  The
Company accounts for stock option and warrant grants issued and vesting to
employees using SFAS No. 123R “Share-Based Payment” effective January 1, 2006,
for all share-based payments granted based on the requirements of SFAS No. 123R
for all awards granted to employees.
  The
Company accounts for stock option and warrant grants issued and vesting to
non-employees in accordance with Emerging Issues Task Force (“EITF”) Issue No.
96-18 “Accounting for Equity Instruments that are Issued to Other Than Employees
for Acquiring, or in Conjunction with Selling,
  Goods or
Services” and EITF Issue No. 00-18 “Accounting Recognition for Certain
Transactions involving Equity Instruments Granted to Other Than Employees”
whereas the value of the stock compensation is based upon the measurement date
as determined at either (i) the date at which a performance commitment is
reached, or (ii) at the date at which the necessary performance to earn the
equity instruments is complete.
 8
 BALQON
CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER
30, 2008
 NOTE
1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
  Financial
Assets and Liabilities Measure at Fair Value
  Effective
January 1, 2008, the Company adopted SFAS No. 157, “Fair Value
Measurements.” This Statement defines fair value for certain financial and
nonfinancial assets and liabilities that are recorded at fair value, establishes
a framework for measuring fair value, and expands disclosures about fair value
measurements. This guidance applies to other accounting pronouncements that
require or permit fair value measurements. On February 12, 2008, the Financial
Accounting Standards Board (“FASB”) finalized FASB Staff Position (“FSP”) No.
157-2, Effective Date of FASB Statement No. 157. This FSP delays the effective
date of SFAS No. 157 for nonfinancial assets and liabilities to fiscal years
beginning after November 15, 2008 and interim periods within those fiscal
years, except for those items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). The adoption
of SFAS No. 157 had no effect on the Company’s consolidated financial position
or results of operations.
  Concentrations
  Financial
instruments, which potentially subject the Company to concentrations of credit
risk, consist principally of cash and unsecured accounts
receivable.
  The
Company maintains cash balances at one bank. At times, the amount on deposit
exceeds the federally insured limits. Management believes that the financial
institution that holds the Company’s cash is financially sound and, accordingly,
minimal credit risk exists.
  For the
nine months ended September 30, 2008 and 2007, contract revenue earned is
from one contract with the City of Los Angeles and the South Coast Air Quality
Management District (“AQMD”).   For the nine months ended
September 30, 2008, sale of parts were to one customer.
  For the
nine months ended September 30, 2008 and 2007, 24% and 28%, respectively,
of contract costs incurred were to a single vendor.  At
September 30, 2008, accounts payable to this vendor represented 8% of total
accounts payable.  At September 30, 2008, three other vendors had
balances representing 35%, 27%, and 8%, respectively, of total accounts
payable.
  Recent
Accounting Pronouncements
  In March
2008, the FASB issued SFAS No. 161,“Disclosures about
Derivative Instruments and Hedging Activities—an amendment of FASB Statement No.
133,” to improve financial reporting of derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity’s financial position, financial
performance and cash flows. SFAS No. 161 applies to fiscal years and interim
periods beginning after November 15, 2008.
  In
December 2007, the FASB issued SFAS No. 141 (R), “Business Combinations,” which
establishes accounting principles and disclosure requirements for all
transactions in which a company obtains control over another
business.  SFAS No. 141 (R) applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. Earlier
adoption is prohibited.
  9
 BALQON
CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER
30, 2008
 NOTE
1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
  Recent
Accounting Pronouncements (continued)
  In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51.” SFAS No. 160
establishes accounting and reporting standards that require that the ownership
interests in subsidiaries held by parties other than the parent be clearly
identified, labeled, and presented in the consolidated statement of financial
position within equity, but separate from the parent’s equity; the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest be clearly identified and presented on the face of the consolidated
statement of income; and changes in a parent’s ownership interest while the
parent retains its controlling financial interest in its subsidiary be accounted
for consistently. SFAS No. 160 also requires that any retained noncontrolling
equity investment in the former subsidiary be initially measured at fair value
when a subsidiary is deconsolidated. SFAS No. 160 also sets forth the disclosure
requirements to identify and distinguish between the interests of the parent and
the interests of the noncontrolling owners. SFAS No. 160 applies to all entities
that prepare consolidated financial statements, except not-for-profit
organizations, but will affect only those entities that have an outstanding
noncontrolling interest in one or more subsidiaries or that deconsolidate a
subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2008. Earlier
adoption is prohibited. SFAS No. 160 must be applied prospectively as of the
beginning of the fiscal year in which it is initially applied, except for the
presentation and disclosure requirements. The presentation and disclosure
requirements are applied retrospectively for all periods presented.
  The
Company does not believe that the adoption of the above recent pronouncements
will have a material effect on the Company’s consolidated results of operations,
financial position, or cash flows.
  NOTE
2 – COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
  In May
2007, the Company received a $527,000 contract with the City of Los Angeles and
the AQMD to develop a prototype short-range heavy-duty electric truck. This
zero-emissions, heavy-duty, all-electric truck is currently being tested at the
Port of Los Angeles as a short-range vehicle used for hauling fully loaded
40-foot cargo containers around the Port of Los Angeles.  At September
30, 2008, the contract was estimated to be approximately 99%
complete.
  10
 BALQON
CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER
30, 2008
 NOTE
2 – COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
(continued)
  The
asset, “Costs and estimated earnings in excess of billings on uncompleted
contracts and the liability, “Billings in excess of costs and estimated earnings
on uncompleted contracts,” represents costs incurred or billings in excess of
revenue recognized at September 30, 2008 and December 31, 2007 as
follows:
 
 September 30,
      2008
                    (Unaudited)
                
                
                December
      31,
                    2007Costs
      incurred on uncompleted contracts
                
                $
                367,384
                
                
                $
                280,263Estimated
      earnings
                
                
                139,518
                
                
                
                102,473506,902
                
                
                
                382,736Less,
      billings to date
                
                
                514,000
                
                
                
                454,000$
                7,098
                
                
                $
                (71,264
                )Included  in
      accompanying balance sheets under the following captions:Costs
      and estimated earnings in excess of billings on uncompleted
      contracts
                
                $
                7,098
                
                
                $
                —Billings
      in excess of costs and estimated earnings on uncompleted
      contracts
                
                $
                —
                
                
                $
                71,264
  NOTE
3 - PROPERTY AND EQUIPMENT
  Property
and equipment are comprised as follows:
  September 30,
      2008
                    (Unaudited)
                
                
                December
      31, 2007Computer
      equipment and software
                
                $
                36,898
                
                
                $
                9,052Office
      furniture
                
                
                24,476
                
                
                
                9,172Machinery
                
                
                6,395
                
                
                
                6,395Leasehold
      improvements
                
                
                21,711
                
                
                
                —Total
      property and equipment, cost
                
                
                89,480
                
                
                
                24,619Less:
      accumulated depreciation
                
                
                (9,942
                )
                
                
                (3,572
                )Property
      and equipment, net
                
                $
                79,538
                
                
                $
                21,047
  Depreciation
expense for the nine months ended September 30, 2008 and 2007 was $6,370
and $1,279, respectively.
  11
 BALQON
CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER
30, 2008
 NOTE
4 – INTANGIBLE ASSETS
  On
September 9, 2008, the Company acquired intellectual property developed by
Robert Gruenwald.  The intellectual property is used in the
development and manufacture of flux vector inverters.
  The
purchase price was $350,000.  On September 9, 2008, $250,000 was
paid and the Company issued an unsecured promissory note for the balance of
$100,000, due March 9, 2009 (see Note 6).  The $350,000 purchase
price plus costs incurred in connection with this asset purchase have been
preliminarily recorded as “Intangible Assets” on the accompanying condensed
balance sheet.  Management currently estimates the useful life of
these intangible assets to be 5 years.  The Company is in the process
of engaging a third party valuation firm to evaluate acquired intangibles, as
such, the Company’s evaluation may change based on final valuation.
  The
amounts of intangible assets and accumulated amortization for the nine months
ended September 30, 2008 are as follows:
  September
      30, 2008
                    (Unaudited)Amortized
      intangible assets:Intellectual
      property
                
                $
                353,465Accumulated
      amortization
                
                
                —Totals
                
                $
                353,465
  There was
no amortization recorded in the three and nine month periods ended September 30,
2008.  Amortization expense is estimated to be for the 12 month period
ended September 30:
 2009
                
                $
                70,8962010
                
                
                70,8962011
                
                
                70,8962012
                
                
                70,8962013
                
                
                70,881
  NOTE
5 – CONVERTIBLE PROMISSORY NOTES
  The convertible
promissory notes are comprised as follows as of September 30, 2008 and
December 31, 2007:
  September 30,
                    2008
                    (Unaudited)
                
                
                December
      31, 2007Convertible
      promissory notes, interest at 10% per annum payable at maturity, due
      January 2, 2009
                
                $
                1,310,000
                
                
                $
                —
  On July
11, 2008, the Company raised $500,000 through the issuance of senior secured
convertible promissory notes, secured by substantially all the assets of the
Company, to five accredited investors (the “July Private
Placement”).  The notes are due January 2, 2009, bear interest at
10% per annum due at maturity, and are secured by all the assets of the
Company.  The notes are convertible into shares of common stock of the
Company at a conversion price of $1.00 per share.  In connection with
the July Private Placement, the Company issued warrants to acquire 500,000
shares of common stock at an exercise price of $1.50 per share (see Note
9).
 12
 BALQON
CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER
30, 2008
 NOTE
5 – CONVERTIBLE PROMISSORY NOTES (continued)
  On
September 15, 2008, the Company raised $810,000 through the issuance of senior
unsecured convertible promissory notes to 15 accredited investors (the
“September Private Placement”).  The notes are due January 2, 2009,
bear interest at 10% per annum due at maturity, and are secured by all the
assets of the Company.  The notes are convertible into shares of
common stock of the Company at a conversion price of $1.00 per
share.  In connection with the September Private Placement, the
Company also issued warrants to acquire 810,000 shares of common stock at an
exercise price of $1.50 per share (see Note 10).
  On
October 24, 2008, the notes issued in the July Private Placement and September
Private Placement were converted into 1,310,000 shares of common stock of the
Company’s immediately preceding the closing of the merger between the Company
and BMR (see Note 1).
  NOTE
6 – NOTES PAYABLE TO RELATED PARTIES, UNSECURED
  Notes
payable, unsecured, consists of the following at:
  September 30,
      2008
                    (Unaudited)
                
                
                December
      31, 2007Notes
      payable, unsecured, interest at 6% per annum payable at maturity, due
      December 6, 2008
                
                $
                25,875
                
                
                $
                —Note
      payable, issued in connection with the acquisition of intangible assets
      (see Note4),
      unsecured, interest at the prime rate (5% at September 30 2008) per
      annum, payable at maturity, due March 9, 2009
                
                
                100,000Total
      notes payable
                
                $
                125,875
                
                
                $
                —
  NOTE
7 – INCOME TAXES
  The
Company has federal and state net operating loss carryforwards that can be used
through 2019 to offset taxable income, and accordingly, has not recorded a
provision for income taxes in the current year.
  Significant
components of the Company’s deferred income tax liability at September 30,
2008, December 31, 2007 are as follows:
  September 30,
                    2008
                    (Unaudited)
                
                
                December
      31,
                    2007Deferred
      tax assets:Net
      operating loss carry forward
                
                $
                291,980
                
                
                $
                29,775Total
      deferred tax assets
                
                
                291,980
                
                
                
                29,775Valuation
      allowance
                
                
                (291,980
                )
                
                
                (29,775
                )Net
      deferred income tax asset
                
                $
                —
                
                
                $
                —
  In the
Company’s opinion, it is uncertain whether they will generate sufficient taxable
income in the future to fully utilize the net deferred tax
asset.  Accordingly, a valuation allowance for the deferred tax asset
has been recorded.
  13
 BALQON
CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER
30, 2008
 NOTE
7 – INCOME TAXES (continued)
  Effective
January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes: an interpretation of FASB Statement No. 109.” The
Interpretation 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 FIN 48, 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. FIN 48 also provides guidance on de-recognition, classification,
interest and penalties on income taxes, accounting in interim periods and
requires increased disclosures. At the date of adoption, and as of December 31,
2007, the Company does not have a liability for unrecognized tax
uncertainties.
  NOTE
8 – SHAREHOLDER’S EQUITY
  The
Company was capitalized on April 21, 2005 when it issued 1,000 shares of no par
common stock for $5,000 to its founding shareholder.
  On June
4, 2008, the Board of Directors of the Company approved a 16,667:1 stock split
of the Company’s no par common stock.  All share amounts in the
accompanying financial statements are presented as if the stock split occurred
at the beginning of the period presented.
  On June
4, 2008, the Board of Directors issued 4,500,090 shares of common stock to
consultants for past services rendered.  The shares were valued at
$65,476 and recorded as compensation expense.  The shares were valued
based on an appraisal of the Company at June 2008.  Included in the
4,500,090 shares of common stock granted to consultants on June 4, 2008,
1,250,025 shares of common stock valued at $18,189 were granted to the founding
shareholder’s brother.
  On August
28, 2008, the Company granted 500,000 shares of common stock valued at $7,275 to
three consultants for services rendered.  Also on August 28, 2008, the
Company issued 332,910 shares of common stock valued at $4,844 to its CEO and
founding shareholder.  The shares were valued based upon an appraisal
of the Company at June 2008.
  NOTE
9 – STOCK OPTIONS AND WARRANTS
  Stock
Options
  On June
4, 2008, the Company granted options to purchase 4,562,592 shares of common
stock at $1.50 to $2.50 per share to an employee and two
consultants.  The options and warrants vested immediately on the date
granted, and expire between June 30, 2010 and June 30,
2012.
  The fair
value of options and warrants granted in the nine month period ended
September 30, 2008 were valued at zero determined using a Black-Scholes
option pricing model with the following assumptions:
  Expected
      dividend yield
                
                
                —Expected
      stock price volatility
                
                
                5.58
                %Risk-free
      interest rate
                
                
                3.13
                %Expected
      life of service-related options and warrants
                
                
                —
  For the
nine months ended September 30, 2008 and 2007, the Company did not
recognize any compensation expense related to the fair value of vested
options.
  14
 BALQON
CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER
30, 2008
 NOTE
9 – STOCK OPTIONS AND WARRANTS (continued)
  Stock
Options (continued)
  At
September 30, 2008, options shares outstanding are as follows:
  Shares
                
                
                Average
                    ExercisePriceBalance
      at January 1, 2008
                
                
                —
                
                
                
                —Granted
                
                
                4,562,592
                
                
                $
                2.00Exercised
                
                
                —
                
                
                
                —Cancelled
                
                
                —
                
                
                
                —Balance
      at September 30, 2008 (unaudited)
                
                
                4,562,592
                
                
                $
                2.00
  Warrants
  On June
4, 2008, the Company granted a warrant to purchase 729,180sharesof the Company’s common stock at an exercise price of $1.50
to $2.50 per share to a consultant (the “Marlin Warrants”).
  On
September 15, 2008, the Company issued warrants to purchase 1,310,000 shares of
the Company’s common stock at an exercise price of $1.50 per share in connection
with the issuance of convertible promissory notes (see Note 5) entered into
with investors on July 11, 2008 and September 15, 2008.
  The fair
value of warrants granted in the nine month period ended September 30, 2008
were valued at zero determined using a Black-Scholes option pricing model with
the following assumptions:
  Expected
      dividend yield
                
                
                —Expected
      stock price volatility
                
                
                5.58
                %Risk-free
      interest rate
                
                
                3.13
                %Expected
      life of service-related options and warrants
                
                
                —
  At
September 30, 2008, warrants shares outstanding are as
follows:
  Shares
                
                
                Average
                    Exercise
      PriceBalance
      at January 1, 2008
                
                
                —
                
                
                
                —Granted
                
                
                2,039,180
                
                
                $
                1.50Exercised
                
                
                —
                
                
                
                —Cancelled
                
                
                —
                
                
                
                —Balance
      at September 30, 2008 (unaudited)
                
                
                2,039,180
                
                
                $
                1.50
  15
  BALQON
CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER
30, 2008
 NOTE
9 – STOCK OPTIONS AND WARRANTS (continued)
  Additional
information regarding options outstanding as of September 30, 2008 is as
follows:
  Options
and Warrants Outstanding and Exercisable
  Number
      of Shares Under
                    Options/Warrants
                
                Exercise
                    Price
                
                Expiration
                    Date
                
                Weighted
      Average
                    Exercise
      Price1,763,924
                
                $        
         1.50
                
                June
      4, 2009
                
                $     
             1.501,763,924
                
                $        
         2.00
                
                June
      4, 2010
                
                $            
      2.001,763,924
                
                $        
         2.50
                
                June
      4, 2011
                
                $            
      2.501,310,000
                
                $        
         1.50
                
                September
      14, 2011
                
                $            
      1.506,601,772
                
                $1.50 - $2.00
                
                
                
                $            
      2.00
  At
September 30, 2008, the aggregate intrinsic value of the 4,562,592 options
outstanding and exercisable was zero. At September 30, 2008, all options
and warrants were vested and there were no unvested options or warrants
outstanding.
  NOTE
10 – COMMITMENTS AND CONTINGENCIES
  Contract
  On June
25, 2008, the Company entered into an agreement with the City of Los Angeles to
produce and deliver 20 electric yard hostlers, 5 short-haul electric drayage
trucks, and associated equipment including chargers, batteries and controllers
for a total of $5,383,750.  In September 2008, the Company began work
on the first units it intends to produce and expects to deliver all the vehicles
and associated equipment to the City of Los Angeles by March 2009.
  The
Company agreed to move its research and production facilities to the City of Los
Angeles by December 2009.  The Company also agreed to pay the City of
Los Angeles a royalty fee of $1,000 per electric vehicle it sells to a purchaser
or lessee other than the City of Los Angeles or the AQMD.
  Employment
Contracts
  On April
30, 2008, the Company signed an employment agreement with its
CEO.  The employment agreement is effective from April 30, 2008 and
provides for, among other items, the CEO to receive compensation of $250,000 per
annum during the first and second year of the agreement, and at least $300,000
per annum thereafter.
 On August
1, 2008, the Company signed an employment agreement with its Vice President
Engineering.  The employment agreement is effective from August 1,
2008 and provides for, among other items, the VP Engineering to receive
compensation of $150,000 per annum during the first year of the agreement, and
$175,000 per annum thereafter.
  16
 BALQON
CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER
30, 2008
 NOTE
10 – COMMITMENTS AND CONTINGENCIES (continued)
  Employment
Contracts (continued)
  On
September 9, 2008, the Company signed an employment agreement with its Vice
President Research & Development.  The employment agreement is
effective from September 9, 2008 and provides for, among other items, the VP
Research & Development to receive compensation of $150,000 per annum during
the first year of the agreement, and $175,000 per annum thereafter.
  Leases
  The
Company leases its research and development facilities located in Santa Ana,
California under a lease that expires on May 31, 2009. The lease has a current
monthly payment of $3,206.  Subsequent to June 30, 2008, the
Company entered into a three year lease of manufacturing facilities located in
Harbor City, California that expires on July 31, 2011. The lease has a base
monthly rent of $10,540.
  Rent
expense for the year ended December 31, 2007 $25,787.  Rent expense
for the nine months ended September 30, 2008 and 2007 was $65,216 and
$14,536, respectively.
  The
following is a schedule by years of future minimum rental payments required
under the non-cancelable operating leases described above as of
September 30, 2008:
  Years
      ending December 31:2009
                
                $
                96,8332010
                
                
                139,4402011
                
                
                122,8802012
                
                
                71,680Thereafter
                
                
                —
  NOTE
11 - SUBSEQUENT EVENTS
  On
October 24, 2008, the merger (see Note 1) was completed and Balqon Corporation,
a California
corporation (“Balqon California”)merged with and into BMR and BMR
changed its name to Balqon Corporation.
  On
October 24, 2008, immediately preceding the closing of the merger with
Balqon Corporation (formerly BMR) (see Note 1), Balqon California raised an
aggregate of $575,000 through the issuance of 575,000 shares of common stock at
$1.00 per share to six accredited investors (the “October Private
Placement”).  In connection with this offering, Balqon California also
issued three-year warrants to purchase an aggregate of 575,000 shares of common
stock at an exercise price of $1.50 per share (the “October
Warrants”).
  On
October 24, 2008, immediately preceding the closing of the merger (see
Note 1), Balqon Corporation (formerly BMR) issued warrants (the “BMR
Warrants”) to purchase an aggregate of 184,598 shares of common
stock.  One-third of the BMR Warrants have an exercise price of $1.50
per share and expire on October 24, 2009, one-third of the BMR Warrants
have an exercise price of $2.00 per share and expire on October 24, 2010,
and one-third of the BMR Warrants have an exercise price of $2.50 per share and
expire on October 24, 2011.
 17
 BALQON
CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER
30, 2008
 NOTE
11 - SUBSEQUENT EVENTS (continued)
  Balqon
California, in connection with the July Private Placement, the September Private
Placement and the October Private Placement, entered into certain registration
rights agreements (collectively, the “Balqon Registration Rights
Agreements”).  Under the Balqon Registration Rights Agreements, Balqon
Corporation (formerly BMR) is obligated to register for resale an aggregate of
3,793,348 shares of common stock, of which an aggregate of 1,885,000 shares of
common stock underly the July Warrants, September Warrants and the October
Warrants.  Immediately preceding the consummation of the merger with
Balqon California, Balqon Corporation
(formerly BMR) also entereda registration rights agreement (the “BMR
Registration Rights Agreement”) with its stockholders to register for resale an
aggregate of 1,400,000 shares of BMR’s common stock and with the holders of the
BMR Warrants to register for resale and aggregate of 184,598 shares of common
stock underlying the BMR Warrants.
 Under the
Balqon Registration Rights Agreements and the BMR Registration Rights Agreement,
Balqon Corporation (formerly BMR) is obligated to file, on or before December
23, 2008, a registration statement with the Securities and Exchange Commission,
registering for resale all shares of common stock covered by the Balqon
Registration Rights Agreements and BMR Registration Rights
Agreements.
  On
October 24, 2008, immediately preceding the consummation of the merger with
Balqon California (see Note 1), Balqon Corporation (formerly BMR) adopted
the 2008 Stock Incentive Plan (“2008 Plan”).  Initially, 7,500,000
shares of common stock are authorized for issuance under the 2008
Plan.
 18
  ITEM
      2.
                MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
  The
following discussion and analysis should be read in conjunction with our
unaudited condensed consolidated financial statements for the three and nine
months ended September 30, 2008 and the related notes and the other
financial information included elsewhere in this report. This report and our
financial statements and notes to financial statements contain forward-looking
statements, which generally include the plans and objectives of management for
future operations, including plans and objectives relating to our future
economic performance and our current beliefs regarding revenues we might
generate and profits we might earn if we are successful in implementing our
business strategies. Our actual results could differ materially from those
expressed in these forward-looking statements as a result of any number of
factors, including those set forth under the “Risk Factors” section of our
Current Report on Form 8-K for October 24, 2008 filed with the SEC on
October 30, 2008 and elsewhere in this report. The forward-looking
statements and associated risks may include, relate to or be qualified by other
important factors, including, without limitation:
  ·
                the
      projected growth or contraction in the industries within which we
      operate;
  ·
                our
      business strategy for expanding, maintaining or contracting our presence
      in these markets;
  ·
                anticipated
      trends in our financial condition and results of operations;
      and
  ·
                our
      ability to distinguish ourselves from our current and future
      competitors.
  We do not
undertake to update, revise or correct any forward-looking
statements.
  Any of
the factors described above, elsewhere in this report or in the “Risk Factors”
section of our Current Report on Form 8-K for October 24, 2008 filed with
the SEC on October 30, 2008 could cause our financial results, including
our net income or loss or growth in net income or loss to differ materially from
prior results, which in turn could, among other things, cause the price of our
common stock to fluctuate substantially.
  Overview
  We
develop, assemble, market and sell heavy-duty electric vehicles, flux vector
inverters, electric traction drive systems and battery management
systems.  Our net revenues decreased by $17,536, or 8%, to $213,362
for the nine months ended September 30, 2008 as compared to $230,898 for
the nine months ended September 30, 2007.  We reported a net loss
of $771,193 for the nine months ended September 30, 2008 as compared to a
net loss of $46,350 for the nine months ended September 30,
2007.  The decline in financial performance during the nine months
ended September 30, 2008 is a direct result of two key factors. First, the
ramp up of our business in the latter months of 2007 (our business operations
commenced on May 1, 2007), as a result, the revenues and expenses of the nine
months ended September 30, 2007 reflect only five months of operations.
Second, during the nine months ended September 30, 2008, in addition to
increased expenses for the ramp up of our business, we incurred $429,300 of
legal, accounting, and consulting expenses relating to the reverse
merger.  While our business activities resulted in a revenue decrease
of 8%, we experienced increased cost of revenues of $31,765, or 23%, and
increased operating and other expenses of $709,588, or 2,480% over the
comparable period of 2007.
  19
  MergerTransaction
  On
October 24, 2008, we completed an Agreement and Plan of Merger, or Merger
Transaction, with Balqon Corporation, a California corporation, or Balqon
California, and changed our name to Balqon Corporation.  Upon
completion of the Merger Transaction, we acquired the business of Balqon
California.  In connection with the Merger Transaction, we issued an
aggregate of 23,908,348 shares of our common stock to the shareholders of Balqon
California which resulted in a change in control of our company.  The
Merger Transaction has been accounted for as a recapitalization of Balqon
California with Balqon California being the accounting acquiror.  As a
result, the historical financial statements of Balqon California are now the
historical financial statements of the legal acquiror, Balqon Corporation
(formerly BMR Solutions, Inc.).
  In
connection with the Merger Transaction, we issued an aggregate of 23,908,348
shares of our common stock to the shareholders of Balqon
California.  In addition, the holders of warrants to acquire an
aggregate of 2,614,180 shares of common stock of Balqon California were deemed
to hold warrants to acquire an equal number of shares of our common stock upon
completion of the Merger Transaction.  In connection with the Merger
Transaction, we also issued under our 2008 Plan options to purchase an aggregate
of 4,562,592 shares of our common stock to certain of our directors and
employees who held options to purchase an equal number of shares of Balqon
California’s common stock immediately prior to the completion of the Merger
Transaction.  In connection with the consummation of the Merger
Transaction, we cancelled 6,377,500 shares of our issued and outstanding common
stock held by certain of our stockholders such that concurrent with the closing
of the Merger Transaction we had approximately 1,400,000 shares of common stock
issued and outstanding.
  At the
time of the closing of the Merger Transaction, we were engaged in the business
of providing local delivery and transportation of mattresses, furniture and
futons in Southern California.  Our current business is comprised
solely of the business of Balqon California.
  Critical
Accounting Policies
  Our
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. We base our 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 of making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.
  We
believe that the following critical accounting policies, among others, affect
our more significant judgments and estimates used in the preparation of our
financial statements:
  Estimates
  The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.  Material estimates relate to the recognition of
contract revenues and estimated costs to complete contracts in process, and
recoverability of reported amounts of long-lived assets.  Actual
results may differ from those estimates.
  20
  Revenues
  Contract Revenue and Cost
Recognition.  In accounting for contracts, we follow the
provisions of the AICPA’s Statement of Position 81-1,  “Accounting for
Performance of Construction-Type and Certain Production-Type
Contracts.”  We recognize revenues using the percentage-of-completion
method of accounting by relating contract costs incurred to date to the total
estimated costs at completion.  This method is used because management
considers costs to be the best available measure of progress on its
contracts.  Contract losses are provided for in their entirety in the
period that they become known, without regard to the
percentage-of-completion.  We also recognize as revenues costs
associated with claims and unapproved change orders to the extent it is probable
that such claims and change orders will result in additional contract revenue,
and the amount of such additional revenue can be reliably
estimated.
  Contract
costs include all direct material and labor costs.  The liability
“Billings in excess of costs and estimated earnings on uncompleted contracts”
represents billings in excess of revenues earned.
  Sales of Parts
Revenue.  We recognize revenue from sales of parts when there
is persuasive evidence that an arrangement exists, delivery of the product has
occurred and title has passed, the selling price is both fixed and determinable,
and collectibility is reasonably assured, all of which generally occurs upon
shipment of our product or delivery of the product to the destination specified
by the customer.
  Stock-Based
Compensation
  We
periodically issue stock purchase options to employees and non-employees in
non-capital raising transactions for services rendered, for financing costs and
on a merit basis. Stock purchase options issued to nonemployees are issued as
warrants with the warrants sharing the same vesting and exercise attributes of
our stock purchase options issued to employees.
  We
account for stock option and warrant grants issued and vesting to employees
using Statement of Financial Accounting Standards, or SFAS, No. 123R
“Share-Based Payment” effective January 1, 2006, for all share-based payments
granted based on the requirements of SFAS No. 123R for all awards granted to
employees.
  Long-lived
Assets
  We
account for the impairment and disposition of long-lived assets in accordance
with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets.”  In accordance with SFAS No. 144, long-lived assets to be
held are reviewed for events or changes in circumstances that indicate that
their carrying value may not be recoverable. We periodically review the carrying
value of long-lived assets to determine whether or not impairment to such value
has occurred.  Based on management’s assessments, no impairments were
recorded during the years ended December 31, 2007 and 2006, or for the nine
month periods ended September 30, 2008 and 2007.
  Income
Taxes
  We
account for income taxes in accordance with SFAS No. 109, “Accounting for Income
Taxes.” Under SFAS No. 109, income taxes are recognized for the amount of taxes
payable or refundable for the current year and deferred tax liabilities and
assets are recognized for the future tax consequences of transactions that have
been recognized in our financial statements or tax returns. A valuation
allowance is provided when it is more likely than not that some portion or the
entire deferred tax asset will not be realized.
  21
  Warrants
  We
evaluate our warrants on an ongoing basis considering the provisions of SFAS No.
150, “Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity,” which establishes standards for issuers of financial
instruments with characteristics of both liabilities and equity related to the
classification and measurement of those instruments.  The warrants are
evaluated considering the provisions of SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities, and Emerging Issues
Task Force, or EITF, Issue No. 00-19, “Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company’s Own
Stock.”
  Results of
Operations
  We have
based our financial statements on the assumption of our operations continuing as
a going concern.  As of September 30, 2008, we had a working
capital deficiency of approximately $1,242,815, had an accumulated deficit of
$858,767and reported a net loss for the nine months ended
September 30, 2008 of $771,193, which raise substantial doubt about our
ability to continue as a going concern.  Our plans for correcting
these deficiencies include the future sales of our products and technologies and
the raising of capital, which are expected to help provide us with the liquidity
necessary to meet operating expenses.  Balqon California recently
raised approximately $1,885,000 in connection with several private placements of
convertible promissory notes, common stock and warrants.  Over the
longer-term, we plan to achieve profitability through our operations from the
sale of our high capacity electric vehicles.  Our financial statements
do not include any adjustments relating to the recoverability and classification
of the recorded asset amounts or the amounts and classification of liabilities
that might be necessary should we be unable to continue our
existence.
  The
tables presented below, which compare our results of operations from one period
to another, present the results for each period, the change in those results
from one period to another in both dollars and percentage change, and the
results for each period as a percentage of net revenues. The columns present the
following:
  ·
                The
      first two data columns in each table show the absolute results for each
      period presented.
  ·
                The
      columns entitled “Dollar Variance” and “Percentage Variance” show the
      change in results, both in dollars and percentages. These two columns show
      favorable changes as a positive and unfavorable changes as negative. For
      example, when our net revenues increase from one period to the next, that
      change is shown as a positive number in both columns. Conversely, when
      expenses increase from one period to the next, that change is shown as a
      negative in both columns.
  ·
                The
      last two columns in each table show the results for each period as a
      percentage of net revenues.
  22
  Nine
Months Ended September 30, 2008 Compared to the Nine Months Ended
September 30, 2007
 
 Nine
      Months Ended
                  September 30,
                
                
                Dollar
                  Variance
                
                
                Percentage
                  Variance
                
                
                Results
      as a Percentage

                  of
      Net Revenues for the
                    Nine
      Months Ended
                    September 30,2008
                
                
                2007
                
                
                Favorable
                    (Unfavorable)
                
                
                Favorable
                    (Unfavorable)
                
                
                2008
                
                
                2007Net
      revenues
                
                $
                213,362
                
                
                $
                230,898
                
                
                $
                (17,536
                )
                
                
                (8
                )%
                
                
                100
                %
                
                
                100
                %Cost
      of revenues
                
                
                170,292
                
                
                
                138,557
                
                
                
                (31,735
                )
                
                
                (23
                )%
                
                
                80
                %
                
                
                60
                %Gross
      profit
                
                
                43,070
                
                
                
                92,341
                
                
                
                (49,271
                )
                
                
                (53
                )%
                
                
                20
                %
                
                
                40
                %Operating
      and other expenses
                
                
                814,263
                
                
                
                138,691
                
                
                
                (675,572
                )
                
                
                (429
                )%
                
                
                381
                %
                
                
                60
                %Net
      loss
                
                $
                (771,193
                )
                
                $
                (46,350
                )
                
                $
                (724,843
                )
                
                
                (1,389
                )%
                
                
                (3,624
                )%
                
                
                (20
                )%
  Net Revenues.  The
$17,536 decrease in net revenues is comprised of decreased contract revenues of
$92,536 offset by increased net revenues of $75,000 relating to product sales.
The product sale occurred during April 2008 in connection with the sale of a
battery charger system to the City of Los Angeles. Contract revenues decreased
due to progress work on our $527,000 contracts with the City of Los Angeles and
the South Coast Air Quality Management District, or AQMD.  During the
nine months ended September 30, 2007, 44% of the AQMD contract was
completed while during the nine months ended September 30, 2008, 26% of the
AQMD contract was completed. This difference in progress work on the contact
caused the $92,536 reduction of contract revenues between the respective nine
month periods.
 Gross Profit.  The
$49,271 decrease in gross profit was due to the increase in contract revenues
between the periods and the small profit margin (8%) on the April 2008 product
sale. We anticipate that our gross profit margin will remain at approximately
20% of net revenues for the remainder of 2008.
  Operating
Expenses.  The $675,572 increase inoperating expenses is
due largely to the $429,300 of legal, accounting, audit and consulting fees
incurred in connection with the reverse merger transaction. The additional
$279,272 of increased operating expenses are attributable to the ramp-up of our
business during the nine months ended September 30, 2008 and the fact that
the results for the nine months ended September 30, 2007 reflect only five
months of actual business operations.  We expect that over the near
term, our general and administrative expenses will increase as a result of
increased management personnel, opening of new manufacturing facilities,
additional operational personnel to manufacture electric vehicle, increased
legal and accounting fees associated with increased corporate governance
activities in response to the Sarbanes-Oxley Act of 2002 and recently adopted
rules and regulations of the SEC and the filing of a registration statement with
the SEC.
  Three
Months Ended September 30, 2008 Compared to the Three Months Ended
September 30, 2007
  Nine
      Months Ended
                  September 30,
                
                
                Dollar

                  Variance
                
                
                Percentage
                  Variance
                
                
                Results
      as a Percentage
                  of
      Net Revenues for the
                  Three
      Months Ended
                  September 30,2008
                
                
                2007
                
                
                Favorable
                    (Unfavorable)
                
                
                Favorable
                    (Unfavorable)
                
                
                2008
                
                
                2007Net
      revenues
                
                $
                10,787
                
                
                $
                188,752
                
                
                $
                (177,965
                )
                
                
                (94
                )%
                
                
                100
                %
                
                
                100
                %Cost
      of revenues
                
                
                17,361
                
                
                
                107,695
                
                
                
                90,334
                
                
                
                84
                %
                
                
                161
                %
                
                
                57
                %Gross
      profit
                
                
                (6,574
                )
                
                
                81,057
                
                
                
                (87,631
                )
                
                
                (108
                )%
                
                
                (61
                )%
                
                
                43
                %Operating
      expenses
                
                
                567,161
                
                
                
                99,724
                
                
                
                (467,737
                )
                
                
                (388
                )%
                
                
                5258
                %
                
                
                53
                %Net
      loss
                
                $
                (573,735
                )
                
                $
                (18,667
                )
                
                $
                (555,068
                )
                
                
                (2,540
                )%
                
                
                (5,197
                )%
                
                
                (10
                )%
  23
  Net Revenues.  The
$177,965 decrease in net revenues is comprised of decreased contract revenues
due to increased progress work on our $527,000 City of Los Angeles and AQMD
contracts.  During the three months ended September 30, 2007, 36%
of the AQMD contract was completed resulting in $188,752 of contract revenues
while during the three months ended September 30, 2008, 2% of the AQMD
contract was completed resulting in contract revenues of $10,787.
  Gross Profit.  The
$87,631 decrease in gross profit was primarily due to the decrease in revenues
between the periods and the increased contract costs incurred during the three
months ended September 30, 2008.
  Operating
Expenses.  The $467,734 increase inoperating expenses is
due largely to the $429,300 of legal, accounting, audit and consulting fees
incurred in connection with the reverse merger transaction.
  Liquidity
and Capital Resources
  During
the year ended December 31, 2007 and the nine months ended
September 30, 2008, we funded our operations primarily with cash flow from
financing activities, principally secured loans from convertible debentures,
unsecured loans from shareholders and other parties. As of September 30,
2008, we had a working capital deficiency of $1,161,851 as compared to a working
capital deficiency of $122,862 at December 31, 2007.  At
September 30, 2008 and December 31, 2007 we had an accumulated deficit
of $1,131,268 and $87,574, respectively, and cash and cash equivalents of
$543,192 and $34, respectively.
  Our
available capital resources at September 30, 2008 consisted primarily of
approximately $543,192 in cash and cash equivalents.  We expect that
our future available capital resources will consist primarily of cash on hand,
cash generated from our business, if any, and future debt and/or equity
financings, if any.
  Cash used
in operating activities for the nine months ended September 30, 2008 was
$813,313 as compared to $59,945 of cash provided by operating activities for the
nine months ended September 30, 2007, and includes a net loss of $771,193,
depreciation and amortization of $6,370 and changes in operating assets and
liabilities of $222,379.  Material changes in asset and liabilities at
September 30, 2008 as compared to December 31, 2007 that affected
these results include:
  ·
                a
      decrease in accounts receivable of
$35,000;
  ·
                an  increase
      in inventory of $106,159;
  ·
                an
      increase in costs in excess of billings on uncompleted contracts of
      $7,098;
  ·
                an
      increase in prepaid expenses of
$1,534;
  ·
                an
      increase in deposits of $14,400;
  ·
                a
      netincreasein accounts
      payable and accrued expenses of $387,834;
and
  ·
                a
      decrease in billings in excess of costs and estimated earnings on
      uncompleted contracts of $71,264.
  24
  Cash used
in investing activities totaled $64,860 for the nine months ended
September 30, 2008 as compared to $22,316 of cash used in investing
activities for the nine months ended September 30, 2007.
  Cash
provided by financing activities totaled $1,426,331 for the nine months ended
September 30, 2008 as compared to $18,364 for the nine months ended
September 30, 2007.
  In the
July Private Placement, Balqon California raised an aggregate of $500,000
through the issuance of senior secured convertible promissory notes to five
accredited investors.  The senior secured convertible promissory notes
had a conversion price of $1.00 per share.  In connection with this
offering, Balqon California also issued three-yearwarrants to acquire up
to an aggregate of 500,000 shares of common stock at an exercise price of $1.50
per share. The senior secured convertible promissory notes were converted into
an aggregate of 500,000 shares of common stock of Balqon California immediately
preceding the closing of the Merger Transaction.
  In the
September Private Placement, Balqon California raised an aggregate of $810,000
through the issuance of convertible promissory notes to 15 accredited
investors.  The convertible promissory notes had a conversion price of
$1.00 per share.  In connection with this offering, Balqon California
also issued three-year warrants to acquire up to an aggregate of 810,000 shares
of common stock at an exercise price of $1.50 per share. The convertible
promissory notes were converted into an aggregate of 810,000 shares of common
stock of Balqon California immediately preceding the closing of the Merger
Transaction.
  In the
October Private Placement, Balqon California raised an aggregate of $575,000
through the issuance of an aggregate of 575,000 shares of common stock to six
accredited investors.  In connection with this offering, Balqon
California also issued three-year warrants to purchase an aggregate of 575,000
shares of common stock at an exercise price of $1.50 per share.
  We are
obligated under registration rights agreements related to the July Private
Placement, September Private Placement and October Private Placement to file, on
or before December 23, 2008, a registration statement with the SEC,
registering for resale shares of common stock and the shares of common stock
underlying the warrants, issued in connection with the above private placement
transactions.
  Our
continued operations are dependent on securing additional sources of liquidity
through debt and/or equity financing.  As indicated above, our
consolidated financial statements as of September 30, 2008 and for the year
ended December 31, 2007 have been prepared on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business. As discussed in this report and in notes to our
consolidated financial statements included in this report, we have suffered
recurring losses from operations and at December 31, 2007 and
September 30, 2008 we had substantial net capital and working capital
deficiencies. These factors, among others, raised substantial doubt about our
ability to continue as a going concern and, with respect to our financial
position on December 31, 2007, led our independent registered public
accounting firm to include in their report an explanatory paragraph related to
our ability to continue as a going concern. The consolidated financial
statements included in this document do not include any adjustments that might
result from the outcome of this uncertainty.
  We have
been, and currently are, working toward identifying and obtaining new sources of
financing. No assurances can be given that we will be successful in obtaining
additional financing in the future.  Any future financing that we may
obtain may cause significant dilution to existing stockholders. Any debt
financing or other financing of securities senior to common stock that we are
able to obtain will likely include financial and other covenants that will
restrict our flexibility. At a minimum, we expect these covenants to include
restrictions on our ability to pay dividends on our common stock. Any failure to
comply with these covenants would have a material adverse effect on our
business, prospects, financial condition, results of operations and cash
flows.
  25
  If
adequate funds are not available, we may be required to delay, scale back or
eliminate portions of our operations and product and service development efforts
or to obtain funds through arrangements with strategic partners or others that
may require us to relinquish rights to certain of our technologies or potential
products or other assets. Accordingly, the inability to obtain such financing
could result in a significant loss of ownership and/or control of our
proprietary technology and other important assets and could also adversely
affect our ability to fund our continued operations and our product and service
development efforts.
  Backlog
  As of
November 14, 2008, we had a backlog of approximately $5.7
million.  Our backlog includes a contract to produce and deliver 21
electric yard tractors, 5 short-haul electric drayage tractors, and associated
equipment including batteries and controllers.  We believe that
products in our backlog will be shipped in the first half of 2009.
  Effects
of Inflation
  The
impact of inflation and changing prices has not been significant on the
financial condition or results of operations of our company.
  Impacts
of New Accounting Pronouncements
  In March
2008, the Financial Accounting Standards Board, or FASB, issued SFAS No.
161,“Disclosures
about Derivative Instruments and Hedging Activities—an amendment of FASB
Statement No. 133,” to improve financial reporting of derivative instruments and
hedging activities by requiring enhanced disclosures to enable investors to
better understand their effects on an entity’s financial position, financial
performance and cash flows. SFAS No. 161 applies to fiscal years and interim
periods beginning after November 15, 2008.  We do not believe
that the adoption of SFAS No. 161 will have a material effect on our
consolidated results of operations, financial position, or cash
flows.
  In
December 2007, FASB issued SFAS Statement No. 141 (R), “Business Combinations,”
which establishes accounting principles and disclosure requirements for all
transactions in which a company obtains control over another
business.  SFAS  No. 141 (R) applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008. Earlier adoption is prohibited.  We do not believe that the
adoption of SFAS No. 141(R) will have a material effect on our consolidated
results of operations, financial position, or cash flows.
  In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51.” SFAS No. 160
establishes accounting and reporting standards that require that the ownership
interests in subsidiaries held by parties other than the parent be clearly
identified, labeled, and presented in the consolidated statement of financial
position within equity, but separate from the parent’s equity; the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest be clearly identified and presented on the face of the consolidated
statement of income; and changes in a parent’s ownership interest while the
parent retains its controlling financial interest in its subsidiary be accounted
for consistently. SFAS No. 160 also requires that any retained noncontrolling
equity investment in the former subsidiary be initially measured at fair value
when a subsidiary is deconsolidated. SFAS No. 160 also sets forth the disclosure
requirements to identify and distinguish between the interests of the parent and
the interests of the noncontrolling owners. SFAS No. 160 applies to all entities
that prepare consolidated financial statements, except not-for-profit
organizations, but will affect only those entities that have an outstanding
noncontrolling interest in one or more subsidiaries or that deconsolidate a
subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2008. Earlier
adoption is prohibited. SFAS No. 160 must be applied prospectively as of the
beginning of the fiscal year in which it is initially applied, except for the
presentation and disclosure requirements. The presentation and disclosure
requirements are applied retrospectively for all periods
presented.  We do not believe that the adoption of SFAS No. 160 will
have a material effect on our consolidated results of operations, financial
position, or cash flows.
  26
  ITEM
      3.
                QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
  Not
Applicable.
  ITEM
      4.
                CONTROLS
      AND PROCEDURES
  Not
applicable.
  ITEM
      4T.
                CONTROLS
      AND PROCEDURES
  Evaluation
of Disclosure Controls and Procedures
  We
conducted an evaluation under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures.  The term “disclosure controls and procedures,” as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended, means controls and other procedures of a company that are designed to
ensure that information required to be disclosed by the company in the reports
it files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in SEC’s rules and
forms.  Disclosure controls and procedures also include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by a company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the company’s management,
including its principal executive and principal financial officers, or persons
performing similar functions, as appropriate, to allow timely decisions
regarding required disclosure.  Based on this evaluation, our Chief
Executive Officer and Chief Financial Officer concluded as of September 30,
2008 that our disclosure controls and procedures were effective at the
reasonable assurance level.
  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.
  27
  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.
  Changes
in Internal Control over Financial Reporting
  There was
no change during our most recently completed fiscal quarter that has materially
affected or is reasonably likely to materially affect, our internal control over
financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act.
 PART
II – OTHER INFORMATION
  ITEM
      1.
                LEGAL
      PROCEEDINGS
  We are
not party to any legal proceedings.
  ITEM
      1A.
                RISK
      FACTORS
  In
addition to the other information set forth in this report, you should carefully
consider the factors discussed under “Risk Factors” in our Current Report on
Form 8-K for October 24, 2008 filed with the SEC on October 30, 2008,
which could materially affect our business, financial condition and results of
operations.  The risks described in our Current Report on Form 8-K for
October 24, 2008 filed with the SEC on October 30, 2008 are not the
only risks we face. Additional risks and uncertainties not currently known to us
or that we currently deem to be immaterial also may materially adversely affect
our business, financial condition and results of operations.
  ITEM
      2.
                UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
  Reference
is made to the disclosures in Item 3.02 of our Current Report on Form 8-K for
October 24, 2008 filed with the SEC on October 30, 2008.
  ITEM
      3.
                DEFAULTS
      UPON SENIOR SECURITIES
  None.
  ITEM
      4.
                SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS
  None.
  ITEM
      5.
                OTHER
      INFORMATION
  Our
Current Report on Form 8-K for October 24, 2008 filed with the SEC on
October 30, 2008, as amended on November 5, 2008, is hereby amended by
deleting the risk factor titled “Shares of our common stock eligible,
or to become eligible, for public sale could adversely affect our stock price
and make it difficult for us to raise additional capital through sales of equity
securities” on page 30 of the report in its entirety and replacing it
with the following:
  28
  “Shares of our
common stock eligible, or to become eligible, for public sale could adversely
affect our stock price and make it difficult for us to raise additional capital
through sales of equity securities.
  We cannot
predict the effect, if any, that market sales of shares of our common stock or
the availability of shares of common stock for sale will have on the market
price prevailing from time to time.  As of October 24, 2008, we
had outstanding 25,308,348 shares of common stock, of which 24,898,348 shares of
common stock were restricted under the Securities Act.  As of
October 24, 2008, we also had outstanding options and warrants that were
exercisable for approximately 7,361,370 shares of common stock.  Sales
of shares of our common stock in the public market, or the perception that sales
could occur, could adversely affect the market price of our common stock. Any
adverse effect on the market price of our common stock could make it difficult
for us to raise additional capital through sales of equity securities at a time
and at a price that we deem appropriate.”
  ITEM
      6.
                EXHIBITS
  Exhibit
 Number         Description
 31.1
                Certification
      Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as
      amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002 (*)
 31.2
                Certification
      Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as
      amended, as Adopted Pursuant to Section 302 of the Sarbanes–Oxley Act of
      2002 (*)
 32.1
                Certification
      of President 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
      (*)
 ___________________
 (*)                 Filed
herewith.
  29
  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.
  BALQON
      CORPORATIONDated:  November
      19, 2008
                    By:
                    /s/ BALWINDER
      SAMRABalwinder
      Samra,Chief Executive
      Officer
                      (principal
      executive officer)
 30
  EXHIBITS
FILED WITH THIS REPORT
 
 Exhibit
 Number         Description
  31.1
                Certification
      Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as
      amended, as Adopted Pursuant to Section 302 of the Sarbanes–Oxley Act of
      2002
 
 31.2
                Certification
      Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as
      amended, as Adopted Pursuant to Section 302 of the Sarbanes–Oxley Act of
      2002
 
 32.1
                Certification
      of President 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