##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
 For the quarterly period ended March 31, 2009
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from _____ to _____
 Commission File Number 333-110680
 VIASPACE INC.
 (Exact name of small business issuer as specified in its charter)
 Nevada
    
    76-0742386(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 171 North Altadena Drive, Suite 101, Pasadena, CA 91107
 (626) 768-3360
 þ o
 YES
o NO o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



VIASPACE INC.
 INDEX
 PagePart I. Financial InformationItem 1. Financial Statements:Consolidated Balance Sheets as of March 31, 2009 (Unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Operations For the Three Months Ended March 31, 2009 and 2008
(Unaudited) and Consolidated Statements of Comprehensive Loss For the Three Months Ended March 31,
2009 and 2008 (Unaudited)
    
    
    4Consolidated Statements of Stockholders Equity (Deficit) as of March 31, 2009 (Unaudited) and
December 31, 2008
    
    
    5Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2009 and 2008 (Unaudited)
    
    
    6Notes to Consolidated Financial Statements (Unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    26Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4. Controls and Procedures
    
    
    31Part II. Other InformationItem 1. Legal Proceedings
    
    
    32Item 1A. Risk Factors
    
    
    32Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 3. Defaults Upon Senior Securities
    
    
    33Item 4. Submission of Matters to Vote of Security Holders
    
    
    33Item 5. Other Information
    
    
    33Item 6. Exhibits
    
    
    34Signatures
    
    
    35Exhibit 31.1Exhibit 31.2Exhibit 32
   2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 VIASPACE INC.
 
 CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    1,760,000
    
    
    $
    2,666,000Accounts receivable
    
    
    445,000
    
    
    
    279,000Inventory
    
    
    424,000
    
    
    
    377,000Prepaid expenses
    
    
    524,000
    
    
    
    797,000Related party receivable
    
    
    1,152,000
    
    
    
    921,000Other current assets
    
    
    14,000
    
    
    
    6,000TOTAL CURRENT ASSETS
    
    
    4,319,000
    
    
    
    5,046,000FIXED ASSETS:Fixed assets, net of accumulated depreciation
    
    
    768,000
    
    
    
    793,000OTHER ASSETS:Land use right, net of accumulated amortization
    
    
    534,000
    
    
    
    514,000Intellectual property, net of accumulated amortization
    
    
    175,000
    
    
    
    179,000Grass license, net of accumulated amortization
    
    
    497,000
    
    
    
    503,000Goodwill
    
    
    12,322,000
    
    
    
    12,322,000Other assets
    
    
    15,000
    
    
    
    13,000TOTAL OTHER ASSETS
    
    
    13,543,000
    
    
    
    13,531,000TOTAL ASSETS
    
    $
    18,630,000
    
    
    $
    19,370,000LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    495,000
    
    
    $
    778,000Accrued expenses
    
    
    289,000
    
    
    
    161,000Current portion of long-term debt
    
    
    44,000
    
    
    
    44,000Loan from related party
    
    
    4,800,000
    
    
    
    4,800,000Related party payable
    
    
    355,000
    
    
    
    422,000TOTAL CURRENT LIABILITIES
    
    
    5,983,000
    
    
    
    6,205,000COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Preferred stock, $0.001 par value, 10,000,000
shares authorized, zero shares issued and
outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value, 1,500,000,000
shares authorized, 846,931,013 and 814,336,863
issued and outstanding in 2009 and 2008,
respectively
    
    
    847,000
    
    
    
    814,000Additional paid in capital
    
    
    35,516,000
    
    
    
    35,168,000Accumulated other comprehensive loss
    
    
    
    
    
    
    Accumulated deficit
    
    
    (30,655,000
    )
    
    
    (29,804,000
    )Total stockholders equity
    
    
    5,708,000
    
    
    
    6,178,000Noncontrolling interest
    
    
    6,939,000
    
    
    
    6,987,000Total equity
    
    
    12,647,000
    
    
    
    13,165,000TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
    
    $
    18,630,000
    
    
    $
    19,370,000
   3




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##### Table of Contents



VIASPACE INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months Ended March 31,2009
    
    
    2008REVENUESGovernment contracts
    
    $
    174,000
    
    
    $
    9,000Commercial contracts
    
    
    72,000
    
    
    
    114,000Framed artwork sales
    
    
    591,000
    
    
    
    Total revenues
    
    
    837,000
    
    
    
    123,000COST OF REVENUES
    
    
    536,000
    
    
    
    60,000GROSS PROFIT
    
    
    301,000
    
    
    
    63,000OPERATING EXPENSESResearch and development
    
    
    9,000
    
    
    
    439,000Selling, general and administrative expenses
    
    
    1,066,000
    
    
    
    1,607,000Total operating expenses
    
    
    1,075,000
    
    
    
    2,046,000LOSS FROM OPERATIONS
    
    
    (774,000
    )
    
    
    (1,983,000
    )OTHER INCOME (EXPENSE)Interest income
    
    
    
    
    
    
    5,000Interest expense
    
    
    (130,000
    )
    
    
    (13,000
    )Other income
    
    
    8,000
    
    
    
    20,000Other expense
    
    
    (3,000
    )
    
    
    Total other income (expense)
    
    
    (125,000
    )
    
    
    12,000LOSS BEFORE DISCONTINUED OPERATIONS, NONCONTROLLING
INTEREST AND INCOME TAXES
    
    
    (899,000
    )
    
    
    (1,971,000
    )Discontinued operations
    
    
    
    
    
    
    (357,000
    )Net loss contributed to noncontrolling interest
    
    
    48,000
    
    
    
    2,000NET LOSS
    
    $
    (851,000
    )
    
    $
    (2,326,000
    )LOSS PER SHARE OF COMMON STOCK BEFORE DISCONTINUED
OPERATIONS AND MINORITY INTERESTBasic and diluted
    
    $
    *
    
    
    $
    (0.01
    )Discontinued operations
    
    
    *
    
    
    
    *Minority interest in consolidated subsidiaries
    
    
    *
    
    
    
    *NET LOSS PER SHARE OF COMMON STOCKBasic and diluted
    
    $
    *
    
    
    $
    (0.01
    )WEIGHTED AVERAGE SHARES OUTSTANDINGBasic and diluted
    
    
    829,974,527
    
    
    
    344,175,718
 
 *
    
    Less than $0.005 per common share. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
 NET LOSS
    
    $
    (851,000
    )
    
    $
    (2,326,000
    )Other Comprehensive Income:Unrealized holding gain (loss) on securities
    
    
    
    
    
    
    8,000Net unrealized holding gain (loss) on securities
    
    
    
    
    
    
    8,000COMPREHENSIVE LOSS
    
    $
    (851,000
    )
    
    $
    (2,318,000
    )
   4




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##### Table of Contents



VIASPACE INC.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(Unaudited)
 Common Stock
    
    
    
    
    
    
    AccumulatedAdditional
    
    
    
    
    
    
    OtherPaid in
    
    
    Treasury
    
    
    Comprehensive
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Stock
    
    
    Income
    
    
    Deficit
    
    
    TotalBALANCE, DECEMBER 31, 2008
    
    
    814,336,863
    
    
    $
    814,000
    
    
    $
    35,168,000
    
    
    $
    
    
    
    $
    
    
    
    $
    (29,804,000
    )
    
    $
    6,178,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (851,000
    )
    
    
    (851,000
    )Stock compensation
expense related to stock
options
    
    
    
    
    
    
    
    
    
    
    41,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,000Shares issued to
consultants, vendors,
employees and directors
for services
    
    
    32,594,150
    
    
    
    33,000
    
    
    
    307,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    340,000BALANCE, MARCH 31, 2009
    
    
    846,931,013
    
    
    $
    847,000
    
    
    $
    35,516,000
    
    
    $
    
    
    
    $
    
    
    
    $
    (30,655,000
    )
    
    $
    5,708,000
   5




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##### Table of Contents



VIASPACE INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Three Months Ended March 31,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (851,000
    )
    
    $
    (2,326,000
    )Adjustments to reconcile net loss used in operating activities:Depreciation
    
    
    11,000
    
    
    
    18,000Amortization of intangible assets
    
    
    16,000
    
    
    
    6,000Stock option compensation expense
    
    
    41,000
    
    
    
    532,000Stock compensation expense related to stock issued
    
    
    531,000
    
    
    
    261,000Operating expenses paid in stock issued
    
    
    58,000
    
    
    
    881,000Noncontrolling interest
    
    
    (48,000
    )
    
    
    (2,000
    )(Increase) decrease in:Accounts receivable
    
    
    (111,000
    )
    
    
    (18,000
    )Inventory
    
    
    (47,000
    )
    
    
    (4,000
    )Prepaid expenses and other current assets
    
    
    14,000
    
    
    
    23,000Increase (decrease) in:Accounts payable
    
    
    (283,000
    )
    
    
    (58,000
    )Unearned revenue
    
    
    (13,000
    )
    
    
    Accrued expenses and other
    
    
    156,000
    
    
    
    (107,000
    )Related party, net
    
    
    (353,000
    )
    
    
    (1,000
    )Net cash used in operating activities
    
    
    (879,000
    )
    
    
    (795,000
    )CASH FLOWS FROM INVESTING ACTIVITIES:Additions to fixed assets
    
    
    (2,000
    )
    
    
    (2,000
    )Investment in land lease
    
    
    (25,000
    )
    
    
    Net cash used in investing activities
    
    
    (27,000
    )
    
    
    (2,000
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from loan
    
    
    
    
    
    
    300,000Payments on long-term debt
    
    
    
    
    
    
    (7,000
    )Proceeds from sale of common stock
    
    
    
    
    
    
    66,000Repayments of loans
    
    
    
    
    
    
    (150,000
    )Proceeds from exercise of warrants
    
    
    
    
    
    
    259,000Net cash provided by financing activities
    
    
    
    
    
    
    468,000NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (906,000
    )
    
    
    (329,000
    )CASH AND CASH EQUIVALENTS, Beginning of period
    
    
    2,666,000
    
    
    
    608,000CASH AND CASH EQUIVALENTS, End of period
    
    $
    1,760,000
    
    
    $
    279,000Supplemental Disclosure of Cash Flow Information:Cash paid during the period for:Interest
    
    $
    
    
    
    $
    13,000Income taxes
    
    $
    
    
    
    $
    
 Supplemental Disclosure of Non-Cash Activities for 2008
 
    
    During the three months ended March 31, 2008, the Company issued
93,794,766 shares of the Companys common stock for services valued on the date of
issuance at $4,954,000. This amount was recorded as prepaid expenses.
   6




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##### Table of Contents



VIASPACE INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 Note 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Description of Business
  Company Background
 Basis of Presentation
 Noncontrolling Interest
  7




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Principles of Consolidation
 Fiscal Year End
 Use of Estimates in the Preparation of the Financial Statements
 Cash and Cash Equivalents
 Concentration of Credit Risk 
 Accounts Receivable Allowance for Doubtful Accounts
 Marketable Securities
 Inventory
 Raw Materials
    
    
    Finished Goods
    
    
    TotalFramed-Artwork
    
    $
    350,000
    
    
    $
    5,000
    
    
    $
    355,000Humidity sensor and battery tester
    
    
    24,000
    
    
    
    5,000
    
    
    
    29,000Grass
    
    
    40,000
    
    
    
    0
    
    
    
    40,000Total
    
    $
    414,000
    
    
    $
    10,000
    
    
    $
    424,000
  8




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##### Table of Contents



Raw Materials
    
    
    Finished Goods
    
    
    TotalFramed-Artwork
    
    $
    286,000
    
    
    $
    16,000
    
    
    $
    302,000Humidity sensor and
battery tester
    
    
    30,000
    
    
    
    5,000
    
    
    
    35,000Grass
    
    
    40,000
    
    
    
    0
    
    
    
    40,000Total
    
    $
    356,000
    
    
    $
    21,000
    
    
    $
    377,000
 Property and Equipment
 Building
    
    20 to 30 yearsMachinery and equipment
    
    10 yearsOffice equipment
    
    5 yearsVehicles
    
    5 yearsComputers
    
    3 years
 Land Use Right
 Intangible Assets
 Impairment of Long-lived Assets
 Fair Value of Financial Instruments
 Income Taxes
  9




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##### Table of Contents



Revenue Recognition Product Revenue
 Product Development Revenue on Fixed-Price Contracts With Milestone Values Defined
 Framed art sales
 Cost of Goods Sold
 Foreign Currency Translation and Comprehensive Income (Loss)
 Segment Reporting and Geographic Information
 Stock Based Compensation
  10




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##### Table of Contents



Net Income (Loss) Per Share
 Research and Development
 NOTE 2  ACCOUNTS RECEIVABLE
  2009
    
    
    2008(Unaudited)U.S. Government customers
    
    $
    76,000
    
    
    $
    32,000Commercial customers
    
    
    18,000
    
    
    
    Framed artwork customers
    
    
    351,000
    
    
    
    247,000Total accounts receivable
    
    
    445,000
    
    
    
    279,000Less: Allowance for doubtful accounts
    
    
    
    
    
    
    Accounts receivable, net
    
    $
    445,000
    
    
    $
    279,000
 NOTE 3  PREPAID EXPENSES
    NOTE 4  FIXED ASSETS
  2009
    
    
    2008(Unaudited)Computer equipment and office equipment
    
    $
    261,000
    
    
    $
    369,000Machinery and equipment
    
    
    200,000
    
    
    
    206,000Building
    
    
    605,000
    
    
    
    606,000Vehicles
    
    
    144,000
    
    
    
    144,000Leasehold improvements
    
    
    26,000
    
    
    
    26,000Total property and equipment
    
    
    1,236,000
    
    
    
    1,351,000Less: Accumulated depreciation
    
    
    468,000
    
    
    
    558,000Fixed assets, net
    
    $
    768,000
    
    
    $
    793,000
  11




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##### Table of Contents



NOTE 5  LAND USE RIGHT
  2009
    
    
    2008(Unaudited)Land use right
    
    $
    630,000
    
    
    $
    605,000Less: Accumulated amortization
    
    
    96,000
    
    
    
    91,000Land use right, net
    
    $
    534,000
    
    
    $
    514,000
  NOTE 6  INTANGIBLE ASSETS
 Intellectual Property
  2009
    
    
    2008(Unaudited)License to patent
    
    $
    380,000
    
    
    $
    380,000Less: Accumulated amortization
    
    
    205,000
    
    
    
    201,000Intellectual property, net
    
    $
    175,000
    
    
    $
    179,000
  Grass License
  Goodwill
  NOTE 7  OWNERSHIP INTEREST IN AFFILIATED COMPANIES
 DMFCC
 VGE
  12




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##### Table of Contents



Ionfinity
 VIASPACE Security
 Concentric Water
 NOTE 8  ACQUISITION OF IPA
        13




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##### Table of Contents



March 31,2008(Unaudited)Revenues  as reported
    
    $
    123,000Revenues  pro forma
    
    $
    670,000Net Income  as reported
    
    $
    (2,326,000
    )Net Income  pro forma
    
    $
    (2,345,000
    )Earnings per share  basic and diluted  as reported
    
    $
    (0.01
    )Earnings per share  basic and diluted  pro forma
    
    $
    (0.01
    )
 *
    
    Less than $0.005 per common share.  14




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##### Table of Contents



NOTE 9  DISCONTINUED OPERATIONS
      NOTE 10  STOCK OPTIONS AND WARRANTS
 VIASPACE Inc. 2005 Stock Incentive Plan
   15




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##### Table of Contents



March
31, 2009
    
    

March
31, 2008(Unaudited)
    
    
    (Unaudited)Risk free interest rate
    
    
    2.53
    %
    
    
    3.28
    %Dividends
    
    
    0
    %
    
    
    0
    %Volatility factor
    
    
    126.13
    %
    
    
    118.81
    %Expected life
    
    6.67 years
    
    
    6.67 yearsAnnual forfeiture rate
    
    
    49.9
    %
    
    
    4
    %
  16




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##### Table of Contents



Employee and Director Option Grants
  Weighted-
    
    
    Weighted-Average
    
    
    AverageExercise
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Price Per
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Share
    
    
    Term In Years
    
    
    ValueOutstanding at December 31, 2008
    
    
    8,130,000
    
    
    $
    0.04Granted
    
    
    3,000,000
    
    
    
    0.01Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding at March 31, 2009
    
    
    11,130,000
    
    
    $
    0.03
    
    
    
    8.6
    
    
    $
    6,000Exercisable at March 31, 2009
    
    
    2,023,000
    
    
    $
    0.05
    
    
    
    8.4
    
    
    $
    
   Direct Methanol Fuel Cell Corporation 2002 Stock Option / Stock Issuance Plan
    Weighted-
    
    
    Weighted-Average
    
    
    AverageExercise
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Price Per
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Share
    
    
    Term In Years
    
    
    ValueOutstanding at December 31, 2008
    
    
    1,396,000
    
    
    $
    .02Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding at March 31, 2009
    
    
    1,396,000
    
    
    $
    .02
    
    
    
    5.7
    
    
    $
    45,000Exercisable at March 31, 2009
    
    
    1,396,000
    
    
    $
    .02
    
    
    
    5.7
    
    
    $
    45,000
   17




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##### Table of Contents



Warrants
  NOTE 11  LONG-TERM DEBT
   Summary of Loans and Long-Term Debt
  2009
    
    
    2008(Unaudited)Community Development Commission of
the County of Los Angeles, secured,
with interest at 5% due July 1, 2009
    
    $
    9,000
    
    
    $
    9,000Community Development Commission of
the County of Los Angeles, secured,
with interest at 5% due September 1,
2009
    
    
    35,000
    
    
    
    35,000Total Long-term Debt
    
    
    44,000
    
    
    
    44,000Less Current Portion of Long-term Debt
    
    
    44,000
    
    
    
    44,000Net Long-term Debt
    
    $
    
    
    
    $
    
  NOTE 12  STOCKHOLDERS EQUITY
 Preferred Stock
  Common Stock
    18




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##### Table of Contents



NOTE 13  INCOME TAX
   Note 14  RETIREMENT PLAN
  Note 15  OPERATING SEGMENTS
    Energy Segment
 (i)
    
    DMFCC: DMFCC is a provider of disposable fuel cartridges and intellectual property
protection for manufacturers of direct methanol and other liquid hydrocarbon fuel cells.
Direct methanol fuel cells are expected to be replacements for traditional batteries and are
expected to gain a substantial market share in the future because they offer longer
operating time as compared to current lithium ion batteries and may be instantaneously
recharged by simply replacing the disposable fuel cartridge.(ii)
    
    VIASPACE Corporate: VIASPACE Corporate is identifying and pursuing additional business
opportunities in areas including fuel cell test equipment such as a relative humidity
sensor, batteries and battery test equipment, alternative fuels, and new products to
conserve energy and reduce emissions.
 Security Segment
 (i)
    
    Ionfinity: Ionfinity is working on a next-generation mass spectrometry technology,
which could significantly improve the application of mass spectrometry for industrial
process control and environmental monitoring and could also spawn a new class of detection
systems for homeland security.
  19




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##### Table of Contents



Framed-Artwork Segment
 (i)
    
    IPA China and IPA BVI: Specialize in manufacturing high-quality, copyrighted, framed
artwork in the PRC which is sold to retail stores in the U.S.
 Grass Segment
 (i)
    
    VGE: VGE is growing Giant King Grass in the PRC to be harvested and sold initially as
a livestock feed and in the future as a feedstock for biofuel production and as a clean
alternative to coal in electricity generating power plants,
    Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31, 2009
    
    
    March 31, 2008(Unaudited)
    
    
    (Unaudited)Revenues:Energy
    
    $
    72,000
    
    
    $
    114,000Security
    
    
    174,000
    
    
    
    9,000Framed-Artwork
    
    
    591,000
    
    
    
    Grass
    
    
    
    
    
    
    Total Revenue
    
    $
    837,000
    
    
    $
    123,000Income (Loss) From Operations:Energy
    
    $
    1,000
    
    
    $
    (590,000
    )Security
    
    
    27,000
    
    
    
    14,000Framed-Artwork
    
    
    28,000
    
    
    
    Grass
    
    
    (176,000
    )
    
    
    Loss From Operations by Reportable Segments
    
    
    (120,000
    )
    
    
    (576,000
    )Corporate Administrative Costs
    
    
    (82,000
    )
    
    
    (782,000
    )Corporate Stock Compensation and Warrant Expense
    
    
    (572,000
    )
    
    
    (625,000
    )Loss From Operations
    
    $
    (774,000
    )
    
    $
    (1,983,000
    )
 March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)Assets:Energy
    
    $
    187,000
    
    
    $
    202,000Security
    
    
    178,000
    
    
    
    134,000Framed-Artwork
    
    
    4,676,000
    
    
    
    5,179,000Grass
    
    
    217,000
    
    
    
    193,000VIASPACE Corporate
    
    
    13,372,000
    
    
    
    13,662,000Total Assets
    
    $
    18,630,000
    
    
    $
    19,370,000
   20




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NOTE 14  NET LOSS PER SHARE
   (Unaudited)Three Months EndedMarch 31,2009
    
    
    2008Stock Options
    
    
    11,130,000
    
    
    
    16,436,000Warrants
    
    
    1,024,000
    
    
    
    624,000
  (Unaudited)Three Months EndedMarch 31,2009
    
    
    2008Basic and diluted net loss per share:Numerator:Net loss attributable to common stock
    
    $
    (851,000
    )
    
    $
    (2,326,000
    )Denominator:Weighted average shares of common stock outstanding
    
    
    829,974,527
    
    
    
    344,175,178Net loss per share of common stock, basic and diluted
    
    $
    *
    
    
    $
    (0.01
    )
 *
    
    Less than $0.005 per share. NOTE 15  RELATED PARTY TRANSACTIONS
  Related Party Receivables
  Related Party Payables
   21




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Employment Agreements
  Note 16  OTHER COMMITMENTS AND CONTINGENCIES
 Leases
  Fiscal Year2010
    
    $
    96,0002011
    
    
    96,0002012
    
    
    32,000Total minimum lease payments
    
    $
    224,000
  Operations in the PRC
   Litigation
   22




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Note 17  FINANCIAL ACCOUNTING DEVELOPMENTS
    Note 18  GOING CONCERN
  Note 19  SUBSEQUENT EVENTS
 Sale of Humidity Sensor Business Unit
   23




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(a)
    
    Sixty Thousand Dollars ($60,000) for the Purchased Assets payable at the time of the closing;
and(b)
    
    One Hundred Fifty Thousand ($150,000) for the Support Services of which One Hundred Ten
Thousand Dollars ($110,000) will be payable at the Closing and Forty Thousand Dollars ($40,000)
will be payable sixty (60) days after the Closing conditioned upon performance of the Support
Services.
  (a)
    
    trade and assumed names VIASENSOR; HS-1000, HS-2000, HS-3000, and all variations;(b)
    
    customer lists and customer orders received after Closing;(c)
    
    Sellers patent rights and intellectual property related to the humidity sensor including
issued US patent number 7,499,169, and any other patent applications, brochures, manuals, sales
presentations and assembly drawings, instructions, software, calibration instructions and shipping
instructions;(d)
    
    parts inventory;(e)
    
    prototype and tradeshow demonstration units;(f)
    
    manufacturing equipment and calibration equipment owned by the company including computers and
monitors, IC programmer and oscilloscope;(g)
    
    Drawings of all parts and/or components of the humidity sensor (a complete printed set and the
original CAD);(h)
    
    Assembly drawings for the humidity sensor (a complete printed set and the original CAD files);(i)
    
    Works instructions explaining how to assemble the humidity sensor;(j)
    
    Works instructions explaining how to calibrate the humidity sensor including acceptable limits;(k)
    
    A complete bill of materials for the humidity sensor;(l)
    
    A complete list of suppliers of each part or assembly;(m)
    
    Circuit diagrams for all circuits in the humidity sensor including interconnection diagrams;(n)
    
    Printed Circuit Board (PCB) information for each PCB within the humidity sensor, a complete
bill of materials for each PCB, a full set of Gerber files for each PCB;(o)
    
    Original CAD design file for each PCB;(p)
    
    Purchase specification/special considerations for each PCB;(q)
    
    Software files containing original source code;(r)
    
    Software release notes, including known bugs;(s)
    
    Copy of compiler used and any related license;(t)
    
    Copy of compiled code as binary file (so you can still make copies even if compiler problems);(u)
    
    All software documentation;(v)
    
    Software version control log;(w)
    
    Details of development environment;(x)
    
    Any test gear related to the humidity sensor;(y)
    
    List of customers and contact information;(z)
    
    List of distributors and contact information; and(aa)
    
    all inventions, technology, processes, concepts (documented or undocumented), patents (and the
right to recover for past infringements thereof), patent applications, licenses, trade secrets,
trademarks (and the right to recover for past infringements thereof), designs and drawings of
Seller elated to the humidity sensor.(bb)
    
    rights of Seller under all agreements relating to such assets set forth in sub-sections (a)
through (aa), above, including but not limited to distributor, representative, teaming agreements.(cc)
    
    all right, title and interest of Seller in and to all Intellectual Property rights relating to
such assets set forth in sub-sections (a) through (aa) above, including without limitation all
books, payment records; accounts; correspondence; production records; technical, accounting and
procedural manuals; development and design data; and other useful business records utilized in the
conduct of or relating to the Purchased Assets.
  24




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(a)
    
    Sellers rights under this Agreement;(b)
    
    Sellers Accounts Receivable for products or services arising out of transactions prior to
Closing;(c)
    
    Securities of VGE, VIASPACE, DMFCC and all assets of VGE, VIASPACE, DMFCC, and all securities
and assets not explicitly covered under this Agreement.
   (i)
    
    the breach of any representation or warranty made by Seller contained in the Agreement;(ii)
    
    the breach of any covenant or agreement by Seller contained in the Agreement;(iii)
    
    any and all Losses suffered or incurred by Buyer by reason of or in connection with any claim
or cause of action of any third party to the extent arising out of any action, inaction, event,
condition, liability or obligation of Seller occurring or existing prior to the Closing; and,(iv)
    
    all liabilities of Seller, none of which shall be assumed by Buyer.
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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
 The following discussion contains certain statements that constitute forward-looking statements.
Such statements appear in a number of places in this Report, including, without limitation,
Managements Discussion and Analysis of Financial Condition or Plan of Operation. These
statements are not guarantees of future performance and involve risks, uncertainties and
requirements that are difficult to predict or are beyond our control. Our future results may
differ materially from those currently anticipated depending on a variety of factors, including
those described below under Risks Related to Our Future Operations and our filings with the
Securities and Exchange Commission. The following should be read in conjunction with the unaudited
Consolidated Financial Statements and notes thereto that appear elsewhere in this Report and in
conjunction with our 2008 annual report on Form 10-K .
 VIASPACE Overview
   www.VIASPACE.com
 Critical accounting policies and estimates
   26




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27




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##### Table of Contents



Three Months Ended March 31, 2009 Compared to March 31, 2008
 Results of Operations
 Revenues
  Cost of Revenues
  Gross Profit
  Research and Development
  Selling, General and Administrative Expenses
  Loss from Operations
  Other Income (Expense), Net
 Interest Income
   28




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Interest Expense
  Other Income and Other Expense
  Discontinued Operations
  Liquidity and Capital Resources
     Contractual Obligations
  Less than 1
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsLong-term debt obligations (a)
    
    $
    44,000
    
    
    $
    44,000
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating lease obligations (b)
    
    $
    224,000
    
    
    $
    96,000
    
    
    $
    128,000
    
    
    $
    
    
    
    $
    
 (a)
    
    The annual installment of principal and interest on the notes payable owed to the
Community Development Commission as discussed in the accompanying footnotes to the
consolidated financial statements are noted.(b)
    
    The Company leased office and laboratory space in Pasadena, California and entered into
a five-year lease on May 1, 2006. The Company vacated its office space on March 1, 2009.
The Company and the landlord are actively looking for a new tenant to assume this lease.
Future minimum lease payments are noted.  29




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Employment Agreements
  Inflation and Seasonality
  Off-Balance Sheet Arrangements
   30




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure controls and procedures.
  Changes in internal controls over financial reporting.
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PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
 Risk Factors Which May Affect Future Results
   Risks Related To Our Business
 We have incurred losses and anticipate continued losses for the foreseeable future.
  Our ability to continue as a going concern is dependent on future financing.
    Our revenues to date have been to a few customers, the loss of which could result in a severe
decline in revenues.
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Risks Related To An Investment In Our Stock
 Any future sale of a substantial number of shares of our common stock could depress the trading
price of our common stock, lower our value and make it more difficult for us to raise capital.
    
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
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ITEM 6. EXHIBITS
 (a) Exhibits
 31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *32
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. *
 *
    
    Filed herewith.   34




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##### Table of Contents



SIGNATURES
  VIASPACE Inc.
(Registrant)Date: May 15, 2009
    /s/ CARL KUKKONENCarl KukkonenChief Executive OfficerDate: May 15, 2009
    /s/ STEPHEN J. MUZIStephen J. MuziChief Financial Officer  35




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EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *31.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *32
    
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. *
  36