SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



|x | Quarterly Report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
|- | -------------------------------------------------------------------------------------------
|  |                                                                                            
|  | For the quarterly period ended March 31, 2013                                              



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 incorporation or organization) | (I.R.S. Employer Identification No.)
|                                                               |                                     

382 N. Lemon Ave., Suite 364, Walnut,
CA 91789

(Address of principal executive offices)



(626) 768-3360

(Issuer’s telephone number)



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.  YESxNOo



Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YESxNOo



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 filero                                            | Accelerated filero        
|------------------------------------------------------------------- | --------------------------
|Non-accelerated filero(Do not check if a smaller reporting company) | Smaller reporting companyx



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  YESoNOx



Indicate the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable date:  1,454,181,983 shares of $0.001 par value common stock issued
and outstanding as of May 13, 2013.
















VIASPACE INC.



INDEX

FISCAL QUARTER ENDED MARCH 31, 2013



|           |                                                                                                                                           | Page
|---------- | ----------------------------------------------------------------------------------------------------------------------------------------- | ----
|Part I.    | Financial Information                                                                                                                     |     
|           |                                                                                                                                           |     
|Item 1.    | Financial Statements                                                                                                                      |     
|           | Consolidated Balance Sheets as of March 31, 2013 (Unaudited) and December 31, 2012                                                        | 3   
|           | Consolidated Statements of Operations and Statements of Comprehensive Loss For the Three Months Ended March 31, 2013 and 2012 (Unaudited) | 4   
|           | Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2013 and 2012 (Unaudited)                                      | 5   
|           | Notes to Consolidated Financial Statements March 31, 2013 (Unaudited) and December 31, 2012                                               | 6   
|Item 2.    | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                                     | 11  
|Item 3.    | Quantitative and Qualitative Disclosures About Market Risk                                                                                | 14  
|Item 4.    | Controls and Procedures                                                                                                                   | 14  
|           |                                                                                                                                           |     
|Part II.   | Other Information                                                                                                                         |     
|           |                                                                                                                                           |     
|Item 1.    | Legal Proceedings                                                                                                                         | 15  
|Item 1A.   | Risk Factors                                                                                                                              | 15  
|Item 2.    | Unregistered Sales of Equity Securities and Use of Proceeds                                                                               | 15  
|Item 3.    | Defaults Upon Senior Securities                                                                                                           | 16  
|Item 4.    | Mine Safety Disclosures                                                                                                                   | 16  
|Item 5.    | Other Information                                                                                                                         | 16  
|Item 6.    | Exhibits                                                                                                                                  | 16  
|           |                                                                                                                                           |     
|Signatures |                                                                                                                                           | 17  







2







PART I – FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



VIASPACE INC.

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                              |  | March 31, 2013 |             |   | December 31, 2012 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----------- | - | ----------------- | -
|                                                                                                                                                              |  | (Unaudited)    |             |   | *                 |  
|ASSETS                                                                                                                                                        |  |                |             |   |                   |  
|CURRENT ASSETS:                                                                                                                                               |  |                |             |   |                   |  
|Cash and equivalents                                                                                                                                          |  | $              | 24,000      |   |                   | $
|Prepaid expenses                                                                                                                                              |  |                | 275,000     |   |                   |  
|TOTAL CURRENT ASSETS                                                                                                                                          |  |                | 299,000     |   |                   |  
|                                                                                                                                                              |  |                |             |   |                   |  
|OTHER ASSETS:                                                                                                                                                 |  |                |             |   |                   |  
|Other assets                                                                                                                                                  |  |                | 1,000       |   |                   |  
|TOTAL OTHER ASSETS                                                                                                                                            |  |                | 1,000       |   |                   |  
|                                                                                                                                                              |  |                |             |   |                   |  
|TOTAL ASSETS                                                                                                                                                  |  | $              | 300,000     |   |                   | $
|                                                                                                                                                              |  |                |             |   |                   |  
|LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                |  |                |             |   |                   |  
|CURRENT LIABILITIES:                                                                                                                                          |  |                |             |   |                   |  
|Accounts payable                                                                                                                                              |  | $              | 38,000      |   |                   | $
|Accrued expenses                                                                                                                                              |  |                | 31,000      |   |                   |  
|Unearned revenue                                                                                                                                              |  |                | 51,000      |   |                   |  
|Related party payables                                                                                                                                        |  |                | 680,000     |   |                   |  
|TOTAL CURRENT LIABILITIES                                                                                                                                     |  |                | 800,000     |   |                   |  
|                                                                                                                                                              |  |                |             |   |                   |  
|COMMITMENTS AND CONTINGENCIES (Note 9)                                                                                                                        |  |                |             |   |                   |  
|                                                                                                                                                              |  |                |             |   |                   |  
|STOCKHOLDERS’ EQUITY (DEFICIT):                                                                                                                               |  |                |             |   |                   |  
|Preferred stock, $0.001 par value, 10,000,000 shares authorized, one share of Series A preferred stock issued and outstanding in 2013 and 2012                |  |                | ―           |   |                   |  
|Common stock, $0.001 par value, 1,500,000,000 shares authorized, 1,452,480,704 and 1,433,366,223 shares issued and outstanding in 2013 and 2012, respectively |  |                | 1,452,000   |   |                   |  
|Additional paid in capital                                                                                                                                    |  |                | 47,011,000  |   |                   |  
|Accumulated deficit                                                                                                                                           |  |                | (48,963,000 | ) |                   |  
|Total stockholders’ equity (deficit)                                                                                                                          |  |                | (500,000    | ) |                   |  
|                                                                                                                                                              |  |                |             |   |                   |  
|TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                          |  | $              | 300,000     |   |                   | $



*	Amounts derived from audited financial statements for the
year ended December 31, 2012



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





3







VIASPACE INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS

(Unaudited)





|                                                                                            |  | Three Months EndedMarch 31, |              
|------------------------------------------------------------------------------------------- |  | --------------------------- | -------------
|                                                                                            |  | 2013                        |              
|REVENUES                                                                                    |  | $                           | 31,000       
|COST OF REVENUES                                                                            |  |                             | 2,000        
|GROSS PROFIT                                                                                |  |                             | 29,000       
|                                                                                            |  |                             |              
|OPERATING EXPENSES                                                                          |  |                             |              
|Operations                                                                                  |  |                             | 11,000       
|Selling, general and administrative                                                         |  |                             | 168,000      
|Total operating expenses                                                                    |  |                             | 179,000      
|LOSS FROM OPERATIONS                                                                        |  |                             | (150,000     
|                                                                                            |  |                             |              
|OTHER INCOME (EXPENSE)                                                                      |  |                             |              
|Interest expense                                                                            |  |                             | (23,000      
|Total other expense (income)                                                                |  |                             | (23,000      
|                                                                                            |  |                             |              
|LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES                                         |  |                             | (173,000     
|INCOME TAXES                                                                                |  |                             | ―            
|                                                                                            |  |                             |              
|LOSS FROM CONTINUED OPERATIONS BEFORE DISCONTINUED OPERATIONS                               |  |                             | (173,000     
|Discontinued operations                                                                     |  |                             | ―            
|NET LOSS                                                                                    |  |                             | (173,000     
|Net loss attributed to noncontrolling interests                                             |  |                             | ―            
|NET LOSS ATTRIBUTED TO VIASPACE                                                             |  | $                           | (173,000     
|COMPREHENSIVE LOSS                                                                          |  | $                           | (173,000     
|                                                                                            |  |                             |              
|LOSS PER SHARE OF
    COMMON STOCK FROM CONTINUING OPERATIONS — Basic and diluted           |  | $                           | *            
|LOSS PER SHARE OF
    COMMON STOCK FROM DISCONTINUED OPERATIONS — Basic and diluted         |  | $                           | *            
|LOSS PER SHARE OF
    COMMON STOCK FROM NET LOSS ATTRIBUTED TO VIASPACE — Basic and diluted |  | $                           | *            
|                                                                                            |  |                             |              
|WEIGHTED AVERAGE SHARES OUTSTANDING—Basic and diluted                                       |  |                             | 1,442,589,593



*   Less than $0.01 per common share.



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





4







VIASPACE INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)





|                                                                            |  | Three Months EndedMarch 31, |         
|--------------------------------------------------------------------------- |  | --------------------------- | --------
|                                                                            |  | 2013                        |         
|CASH FLOWS FROM OPERATING ACTIVITIES:                                       |  |                             |         
|Net loss                                                                    |  | $                           | (173,000
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                             |         
|Depreciation                                                                |  |                             | ―       
|Amortization of intangible assets                                           |  |                             | ―       
|Stock option compensation expense                                           |  |                             | 3,000   
|Stock compensation expense related to stock issued                          |  |                             | ―       
|Operating expenses paid in stock issued                                     |  |                             | 115,000 
|Amortization of debt discount                                               |  |                             | 23,000  
|(Increase) decrease in:                                                     |  |                             |         
|Accounts receivable                                                         |  |                             | ―       
|Inventory                                                                   |  |                             | ―       
|Prepaid expenses                                                            |  |                             | 12,000  
|Increase (decrease) in:                                                     |  |                             |         
|Accounts payable                                                            |  |                             | (36,000 
|Accrued expenses and other                                                  |  |                             | (14,000 
|Unearned revenue                                                            |  |                             | (16,000 
|Related party, net                                                          |  |                             | ―       
|Net cash used in operating activities                                       |  |                             | (86,000 
|                                                                            |  |                             |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                       |  |                             |         
|Additions of fixed assets                                                   |  |                             | ―       
|Net cash used in investing activities                                       |  |                             | ―       
|                                                                            |  |                             |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                       |  |                             |         
|Loan from Dr. Kevin Schewe                                                  |  |                             | 60,000  
|Distribution to noncontrolling interests                                    |  |                             | ―       
|Net cash provided by (used in) financing activities                         |  |                             | 60,000  
|                                                                            |  |                             |         
|NET DECREASE IN CASH AND CASH EQUIVALENTS – continued operations            |  |                             | (26,000 
|CASH AND CASH EQUIVALENTS, Beginning of period – continued operations       |  |                             | 50,000  
|CASH AND CASH EQUIVALENTS, End of period – continued operations             |  | $                           | 24,000  
|                                                                            |  |                             |         
|Supplemental Disclosure of Cash Flow Information:                           |  |                             |         
|Cash paid during the period for:                                            |  |                             |         
|Interest                                                                    |  | $                           | ―       
|Income taxes                                                                |  | $                           | ―       



Supplemental Disclosure of Non-Cash
Activities for 2013:

| | ● | The Company issued 12,000,000 shares of the Company’s
common stock for future services valued at $168,000.  This amount was recorded at issuance as prepaid expenses. 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | During 2013, Dr. Schewe made loans of $60,000 to the Company.   The Company recorded a discount on the note of $23,000 as a result of a beneficial conversion feature.
| | ● | The Company issued 3,125,000 shares of the Company’s common stock as payment on
    accounts payable.                                                                 



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





5







VIASPACE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013 (Unaudited) and December
31, 2012 (Audited)



Note 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



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



GKG can be burned in 100% biomass power
plants to generate electricity; made into pellets that can be burned together with coal to reduce carbon emissions from existing
power plants; generate bio methane through anaerobic digestion, and can be used as a feedstock for low carbon liquid biofuels for
transportation, biochemicals and bio plastics. Cellulosic ethanol, bio butanol and other liquid cellulosic biofuels, do not use
corn or other food sources as feedstock. GKG can also be used as animal feed. GKG and other plants absorb and store carbon dioxide
from the atmosphere as they grow. When they are burned, they release the carbon dioxide back into the atmosphere, but it is the
same carbon dioxide that was removed from the atmosphere, and so this process is carbon neutral. Small amounts of fossil fuel are
used by the farm equipment, transportation of GKG and fertilizer, so that the overall process of growing and burning GKG probably
has some net carbon dioxide emissions, but much lower emissions than burning coal or other fossil fuels directly to create the
same amount of energy. GKG has been independently tested by customers and been shown to have excellent energy content, high bio
methane production, and the cellulosic sugar content needed for biofuels and biochemicals.



Through September 30, 2012, VIASPACE owned
75.6% of the equity interests of VGE. VGE and its subsidiaries Inter Pacific Arts Corporation (“IPA BVI”) and Guangzhou
Inter Pacific Arts (“IPA China”) specialize in the manufacturing of high quality, copyrighted, framed artwork sold
in US retail chain stores. In addition, VGE has an exclusive license to Giant King Grass, a proprietary dedicated energy crop for
a period described in Note 9. On September 30, 2012, the Company executed final agreements to formalize the separation of the Company
and VGE and cause the orderly transfer of all of the Company's equity interest in VGE to Changs, LLC, a company controlled by Sung
Chang, President of VGE and a former Director of the Company. In addition, final agreements have been executed which give VGE the
right to commercially develop Giant King Grass in China and Taiwan and give VIASPACE the right to commercially develop Giant King
Grass in the rest of the world outside of China and Taiwan. Under the final agreements, the VIASPACE secured debt previously owed
to Chang will not have to be paid although it may be used to offset any outside claims made against Chang. Since the Company no
longer has any equity interest in VGE, the Company can no longer consolidate the operations of VGE into the operations of the Company.
The operating results of VGE prior to September 30, 2012 are shown as discontinued operations in the Company’s financial
statements.



Going Concern -The Company
has incurred significant losses from operations, resulting in an accumulated deficit of $48,963,000. The Company expects such losses
to continue. However, on September 30, 2012, as discussed in Note 5, the Company entered into Loan Agreement with Director Kevin
Schewe whereby Dr. Schewe agreed to fund the Company up to $1,000,000 over the next five years in accordance with such agreement.
The Company expects loans from Dr. Schewe and revenue generated from future contracts using the sublicense it has for Giant King
Grass to fund operations for the foreseeable future. However no assurance can be given that Dr. Schewe will continue to fund the
Company or that contracts will be obtained in the future that will be profitable. Accordingly, there continues to be substantial
doubt as to the Company’s ability to continue as a going concern. The consolidated financial statements do not include any
other adjustments that might result from the outcome of these uncertainties.



Basis of Presentation -
The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with accounting
principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Results for interim periods should not be considered indicative of results for a full year. These interim
consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained
in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. The accounting policies used in preparing
these consolidated financial statements are the same as those described in Note 1 to the consolidated financial statements in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2012. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have
been included. All significant intercompany accounts and transactions have been eliminated in consolidation.



The preparation of the consolidated financial
statements in conformity with accounting principles generally accepted in the United States 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 revenues and expenses during the reporting period. Actual results
and outcomes may materially differ from management’s estimates and assumptions.



Reclassifications of prior year’s
data have been made to conform to 2013 classifications. Such classifications had no effect on net income (loss) reported in the
consolidated statements of operations.





6







Subsequent Events -We have
evaluated events and transactions subsequent to the balance sheet date. Based on this evaluation, we are not aware of any events
or transactions (other than those disclosed elsewhere) that occurred subsequent to the balance sheet date but prior to filing that
would require recognition or disclosure in our consolidated financial statements.



NOTE 2 – DISCONTINUED OPERATIONS



During 2012, the Company eliminated all
ownership interests it held in VGE, Direct Methanol Fuel Cell Corporation (“DMFCC”), and Ionfinity, LLC. The revenues
and expenses of each of these entities for the three months ended March 31, 2012 are included in Discontinued Operations.



The revenues and expenses of discontinued operations for three
months ended March 31, 2012 were as follows:



|                                    |  | Three Months Ended March 31, 2012 |         
|----------------------------------- |  | --------------------------------- | --------
|REVENUES                            |  | $                                 | 588,000 
|COST OF REVENUES                    |  |                                   | 433,000 
|GROSS PROFIT                        |  |                                   | 155,000 
|                                    |  |                                   |         
|OPERATING EXPENSES                  |  |                                   |         
|Operations                          |  |                                   | 45,000  
|Selling, general and administrative |  |                                   | 524,000 
|Total operating expenses            |  |                                   | 569,000 
|                                    |  |                                   |         
|LOSS FROM OPERATIONS                |  |                                   | (414,000
|                                    |  |                                   |         
|OTHER INCOME                        |  |                                   |         
|Other income                        |  |                                   | 139,000 
|Total other income                  |  |                                   | 139,000 
|                                    |  |                                   |         
|LOSS BEFORE INCOME TAXES            |  |                                   | (275,000
|Income taxes                        |  |                                   | –       
|                                    |  |                                   |         
|NET LOSS                            |  | $                                 | (275,000



Amortization expense related to intangible
assets included in discontinued operations was $16,000 for the three months ended March 31, 2012.  Rent expense included in
discontinued operations for three months ended March 31, 2012 was $8,000.



NOTE 3 – PREPAID EXPENSES



The Company has entered into agreements
with certain of its consultants and vendors whereby the Company issued registered shares of its common stock under an existing
registration statement on Form S-8 as well as unregistered shares of common stock in exchange for future services to be provided
to the Company. At March 31, 2013 and December 31, 2012, the remaining value of these agreements was $249,000 and $245,000, respectively,
which is included in prepaid expenses in the accompanying consolidated balance sheets.



Other prepaid expenses were $26,000 and
$42,000 at March 31, 2013 and December 31, 2012, respectively.



7







NOTE 4 – STOCK OPTIONS, WARRANTS AND ISSUED STOCK



The fair value of each stock option
granted is estimated on the date of the grant using the Black-Scholes option pricing model. The Black-Scholes
option pricing model has assumptions for risk free interest rates, dividends, stock volatility and expected life of an option
grant. The risk free interest rate is based upon market yields for United States Treasury debt securities at a
maturity near the term remaining on the option. Dividend rates are based on the Company’s dividend
history.  The stock volatility factor is based on the historical volatility of the Company’s stock price. The
expected life of an option grant is based on management’s estimate as no options have been exercised in the Plan to
date. The Company calculated a forfeiture rate for employees and directors based on historical
information. A forfeiture rate of 0% is used for options granted to consultants. The fair value of each
option grant to employees, directors and consultants is calculated by the Black-Scholes method and is recognized as
compensation expense on a straight-line basis over the vesting period of each stock option award. For stock
options issued to employees, directors, consultants and advisory board members for 2012, the fair value was estimated at the
date of grant using the following range of assumptions:



|                        |  | 2012 |                  
|----------------------- |  | ---- | -----------------
|Risk free interest rate |  |      | 0.99% - 1.40%    
|Dividends               |  |      | 0%               
|Volatility factor       |  |      | 124.48% - 134.79%
|Expected life           |  |      | 6.67 years       
|Annual forfeiture rate  |  |      | 34.4% - 35.2%    



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



|                                 |  | Number of
        Shares |            |  | Weighted-
        Average
        Exercise
        Price Per
        Share |   |       | Weighted-
        Average
        Remaining
        Contractual
        Term In Years |  |  | Aggregate
        Intrinsic
        Value | 
|-------------------------------- |  | ------------------------ | ---------- |  | -------------------------------------------------------------------------- | - | ----- | ------------------------------------------------------------------------------------- |  |  | ----------------------------------------- | 
|Outstanding at December 31, 2012 |  |                          | 67,408,000 |  |                                                                            | $ | 0.013 |                                                                                       |  |  |                                           | 
|Granted                          |  |                          | ―          |  |                                                                            |   | ―     |                                                                                       |  |  |                                           | 
|Exercised                        |  |                          | ―          |  |                                                                            |   | ―     |                                                                                       |  |  |                                           | 
|Forfeited                        |  |                          | ―          |  |                                                                            |   | ―     |                                                                                       |  |  |                                           | 
|Outstanding at March 31, 2013    |  |                          | 67,408,000 |  |                                                                            | $ | 0.013 |                                                                                       |  |  | 7.4                                       | 
|Exercisable at March 31, 2013    |  |                          | 65,908,000 |  |                                                                            | $ | 0.013 |                                                                                       |  |  | 7.3                                       | 



There were no stock options issued in 2013.
The Plan recorded $3,000 of compensation expense for director stock options in 2012.  At March 31, 2013, there was $6,000
of unrecognized compensation costs related to non-vested share-based compensation arrangements under the Plan that is expected
to be recognized over a weighted average period of approximately ten months. At March 31, 2013, the fair value of options
vested for employees and directors was $1,028,000.  There were no options exercised during 2013.



NOTE 5 – SHORT-TERM AND LONG-TERM DEBT



Loan Agreement with Dr. Kevin Schewe



Effective September 30, 2012, the Company
entered into a Loan Agreement with Director Kevin Schewe whereby Dr. Schewe agreed to loan up to $1 million to the Company over
a five-year period based on requests from the Company. The loans would be evidenced by a Secured Convertible Note. Each individual
loan will accrue interest at 6% per annum and are secured by all assets of the Company. Each note would mature on the second anniversary
of the issuance date of such note. Each note is convertible at Dr. Schewe’s request, into a fixed number of shares of the
Company’s common stock based on the closing price of the Company’s common stock for the twenty trading days prior to
the issuance of the loan, less a 20% discount.



Through December 31, 2012, Dr. Schewe made
loans to the Company totaling $135,000. Dr. Schewe converted all of the loans outstanding at December 31, 2012 into 32,219,141
shares of Company common stock which was issued to him in 2012.



From January through March 2013, Dr. Schewe
made loans of $60,000 to the Company. The Company recorded a discount on the loans of $23,000 as a result of a beneficial conversion
feature, which will be amortized over the term of the note on a straight-line basis, which approximates the effective interest
method. During the quarter, Dr. Schewe converted the loans into 5,578,244 common shares of the Company. At the time of the conversion,
the company recorded the discount as additional interest expense.





8







NOTE 6 – STOCKHOLDERS’ EQUITY



During 2013, the Company issued 3,125,000
shares of common stock under an existing Registration Statement on Form S-8 to employees and consultants for services provided
or to be provided to the Company. In addition, the Company issued 12,083,478 unregistered shares of common stock to
employees, consultants and vendors for services provided or to be provided to the Company. These share issuances were
recorded at $204,000 which is the fair market value determined by the price of the Company’s common stock trading on the
OTC Markets on the date of grant. During 2013, 1,672,241 shares of common stock were returned by a vendor
to the Company and cancelled. As of March 31, 2013, there were 1,452,480,704 shares of common stock outstanding.



The Company issued 5,578,244 shares of
common stock to Director Kevin Schewe as he converted loans into shares of common stock as allowed under an agreement he has with
the Company as discussed in Note 5.



NOTE 7 – NET LOSS PER SHARE



The Company computes net loss per share
in accordance with FASB ASC Topic 260.  Under its provisions, basic loss per share is computed by dividing net loss by
the weighted average number of shares of common stock outstanding during the periods presented.  Diluted earnings would
customarily include, if dilutive, potential shares of common stock issuable upon the exercise of stock options and warrants.  The
dilutive effect of outstanding stock options and warrants is reflected in earnings per share in accordance with FASB ASC Topic
260 by application of the treasury stock method.  For the periods presented, the computation of diluted loss per share
equaled basic loss per share as the inclusion of any dilutive instruments would have had an antidilutive effect on the earnings
per share calculation in the periods presented.



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



|              |  | 2013 |            |  | 2012 | 
|------------- |  | ---- | ---------- |  | ---- | 
|Stock Options |  |      | 67,408,000 |  |      | 



The following table sets forth the computation
of basic and diluted net loss per share for the three months ended March 31, 2013 and 2012, respectively:





|                                                      |  | 2013 |               |   | 2012 |  
|----------------------------------------------------- |  | ---- | ------------- | - | ---- | -
|Basic and diluted net loss per share:                 |  |      |               |   |      |  
|Numerator:                                            |  |      |               |   |      |  
|Net loss attributable to common stock                 |  | $    | (173,000      | ) |      | $
|Denominator:                                          |  |      |               |   |      |  
|Weighted average shares of common stock outstanding   |  |      | 1,442,589,593 |   |      |  
|                                                      |  |      |               |   |      |  
|Net loss per share of common stock, basic and diluted |  | $    | *             |   |      | $



*  Less
than $0.01



NOTE 8 – RELATED PARTY TRANSACTIONS



Included in the Company’s consolidated
balance sheets at March 31, 2013 and December 31, 2012 are Related Party Payables. The Company has a payable of $680,000 at March
31, 2013 and December 31, 2012. Included in the amount is $640,000 owed to Dr. Kukkonen, CEO of the Company. Of the amount to Dr.
Kukkonen, there is a cash component totaling $136,000 and a common stock component totaling $504,000. Dr.
Kukkonen deferred a portion of his 2009, 2010 and 2011 stock awards and is entitled to the following unregistered shares of Company
common stock at December 31, 2012: 11,195,707 shares for deferred 2009 compensation; 8,467,939 shares for deferred 2010 compensation;
and 24,730,678 shares for deferred 2011 compensation.



Additionally,the Company has agreed to pay VGE $40,000 as reimbursement for legal fees and costs in connection with the separation of
the Company and VGE. This amount is due by September 30, 2014.



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





9







NOTE 9 – OTHER COMMITMENTS AND CONTINGENCIES



Leases



The Company currently has no long term
office lease.  The Company leases land in San Diego County, California where it grows Giant King Grass. Rent expense
charged to operations for three months ended March 31, 2013 and 2012 was $1,000 in both periods.



Collaborative Agreements



We are a party to certain collaborative
agreements with various entities for the joint operation of test plots to establish that GKG grows well in the area and optimal
agronomic practices are developed. These agreements are in the form of development collaborations and licensing agreements. Under
these agreements, we have granted rights to grow and use of GKG. In return, we are entitled to receive certain payments for the
operations of the test plots and license fees on the harvesting of GKG should it ultimately be commercialized.



All of our collaborative agreements are
subject to termination by either party, without significant financial penalty to them. Under the terms of these agreements, upon
a termination we are entitled to reacquire all rights in our technology at no cost and are free to re-license the technology to
other collaborative partners.



License Agreement



Effective of as September 30, 2012, VIASPACE
and VGE entered into a Supply, License and Commercialization Agreement (“License Agreement”) pursuant to which VGE
granted to VIASPACE a nontransferable, royalty-bearing exclusive license to commercialize Giant King Grass within the world other
than China and Taiwan. Additionally, the License Agreement allows VIASPACE to use the Giant King Grass intellectual property and
VIASPACE Green Energy trade name in connection with its efforts to commercialize Giant King Grass. The Company assigned no value
to the sublicense due to uncertainties of future revenues.



VIASPACE agreed that it would not during
the term of the License Agreement and a three-year period thereafter, (i) manufacture, commercialize or otherwise engage in any
research or development of a grass or any other product or material having similar or otherwise competitive properties to Giant
King Grass.



VGE agreed to provide VIASPACE with Giant
King Grass seedlings that will be filled at an agreed upon price as set forth in the License Agreement. VIASPACE agreed to pay
VGE for and during the Term a royalty of eight percent (8%) on net sales made in its territory.



The initial term of the License Agreement
is for two years (“Initial Term”). As a condition to the right to renew after the first two-year term for an additional
two year term, VISPACE needs to achieve the milestones in the first two year period:



| | · | One or more fully-executed, third party sales contracts for the sale
of Giant King Grass shall have been entered into during the Initial Term, pursuant to which VIASPACE is to be paid an aggregate
amount of at least $200,000 within that 24 consecutive monthly period; and two or more, third party growing locations of at least
10 hectares in total shall have been obtained and planted during the Initial Term. The Company expects to meet the milestones during
the first two year period, but no assurance can be given that they will be met.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



Employment Agreements



Effective October 1, 2012, the Company
entered into one-year employment agreements with Carl Kukkonen and Stephen Muzi. Dr. Kukkonen serves as Chief Executive Officer
of the Company and Mr. Muzi serves as Chief Financial Officer, Treasurer and Secretary. Dr. Kukkonen will receive a salary of $160,000
per annum and Mr. Muzi would receive $60,000 per annum. Each of them would also be entitled to a bonus
as determined by the Company’s Board of Directors, customary insurance and health benefits, and reimbursement for out-of-pocket
expenses in the course of his employment. Additionally, Dr. Kukkonen is to receive 20 business days paid leave per year and Mr.
Muzi is to receive 10 business days paid leave.



Litigation



The Company is not party to any material
legal proceedings at the present time.



NOTE 10 – SUBSEQUENT EVENTS



On April 26, Kevin Schewe, advanced an
additional $20,000 pursuant to the convertible loan agreement and immediately converted the $20,000 loan into 1,639,344 shares
of Company common stock at a conversion price of $0.0122 per common share.





10







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 2012 Annual Report on Form 10-K as filed with the SEC.



VIASPACE Overview



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



GKG can be burned in 100% biomass power
plants to generate electricity; made into pellets that can be burned together with coal to reduce carbon emissions from existing
power plants; generate bio methane through anaerobic digestion, and can be used as a feedstock for low carbon liquid biofuels for
transportation, biochemicals and bio plastics. Cellulosic ethanol, bio butanol and other liquid cellulosic biofuels, do not use
corn or other food sources as feedstock. GKG can also be used as animal feed. GKG and other plants absorb and store carbon dioxide
from the atmosphere as they grow. When they are burned, they release the carbon dioxide back into the atmosphere, but it is the
same carbon dioxide that was removed from the atmosphere, and so this process is carbon neutral. Small amounts of fossil fuel are
used by the farm equipment, transportation of GKG and fertilizer, so that the overall process of growing and burning GKG probably
has some net carbon dioxide emissions, but much lower emissions than burning coal or other fossil fuels directly to create the
same amount of energy. GKG has been independently tested by customers and been shown to have excellent energy content, high bio
methane production, and the cellulosic sugar content needed for biofuels and biochemicals.



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



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



Critical accounting policies and estimates



Financial Reporting Release No. 60, “Cautionary
Advice Regarding Disclosure About Critical Accounting Policies” (“FRR60”) issued by the SEC, suggests companies
provide additional disclosure and commentary on those accounting policies considered most critical.  FRR 60 considers
an accounting policy critical if it is important to the Company’s financial condition and results of operations, and requires
significant judgment and estimates on the part of management in its application.  For a summary of the Company’s
significant accounting policies, including the critical accounting policies discussed below, see the accompanying notes to the
consolidated financial statements.



The preparation of the Company’s
financial statements in conformity with accounting principles generally accepted in the United States of America  requires
management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting
period.  On an ongoing basis, the Company evaluates its estimates, which are based on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances.  The result of these evaluations forms
the basis for making judgments about the carrying values of assets and liabilities and the reported amount of expenses that are
not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions.  The
following accounting policies discussed below require significant management judgments and estimates.





11







Revenue Recognition - The
Company has two revenue models for GKG: 1. grass plantation integrated with a power plant or processing facility such as a pellet
mill under company or joint venture control, and 2. contract plantation establishment, support and licensing for a customer
that owns and operates the plantation and power plant.



For 2013, revenue includes amounts earned
through consulting agreements and collaborative agreements for the joint operation of test plots to establish that GKG grows well
in the area and optimal agronomic practices are developed. Revenue earned from collaborative agreements is comprised of negotiated
payments for the operations of the test plots. Deferred revenue represents payments received which are related to future performance.



With regard to revenue recognition in connection
with agreements that include multiple deliverables, management reviews the relevant terms of the agreements and determines whether
such deliverables should be accounted for as a single unit of accounting in accordance with FASB ASC 605-25, Multiple-Element Arrangements.
If it is determined that the items do not have stand-alone value, then such deliverables are accounted for as a single unit of
accounting and any payments received pursuant to such agreement, including any upfront or development milestone payments and any
payments received for support services, will be deferred and included in deferred revenue within our balance sheet until such time
as management can estimate when all of such deliverables will be delivered, if ever. Management reviews and reevaluates such conclusions
as each item in the arrangement is delivered and circumstances of the development arrangement change.



The Company accounts for equity instruments
issued to consultants and vendors in exchange for goods and services in accordance with the provisions of FASB ASC Topic 505-50,
“Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling
Goods or Services” and “Accounting Recognition for Certain Transactions Involving Equity Instruments Granted to Other
than Employees”. The measurement date for the fair value of the equity instruments issued is determined at the earlier of
(i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant
or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument
is recognized over the term of the consulting agreement. In accordance with FASB ASC Topic 505-50, an asset acquired in exchange
for the issuance of fully vested, non-forfeitable equity instruments should not be presented or classified as an offset to equity
on the grantor's balance sheet once the equity instrument is granted for accounting purposes. Accordingly, the Company records
the fair value of the fully vested, non-forfeitable common stock issued for future consulting services as prepaid expenses in its
consolidated balance sheet.



The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  There
is no assurance that actual results will not differ from these estimates.



In accordance with FASB ASC 360-10-35,
“Property, Plant, and Equipment”, management reviews our long-lived asset groups, including property and equipment
and other intangible assets, for impairment whenever events indicate that their carrying amounts may not be recoverable. Some of
the events that we consider as impairment indicators for our long-lived assets, including goodwill, are:



| | £ | our significant underperformance relative to expected operating results;
| | - | ------------------------------------------------------------------------



| | £ | significant adverse change in legal factors or in the business climate;
| | - | -----------------------------------------------------------------------



| | £ | an adverse action or assessment by a regulator;
| | - | -----------------------------------------------



| | £ | unanticipated competition;
| | - | --------------------------



| | £ | a loss of key personnel;
| | - | ------------------------



| | £ | significant decrease in the market value of a long-lived asset; and
| | - | -------------------------------------------------------------------



| | £ | significant adverse change in the extent or manner in which a long-lived asset is being used or its physical condition.
| | - | -----------------------------------------------------------------------------------------------------------------------



When management determines that one or
more impairment indicators are present for an asset group, we compare the carrying amount of the asset group to net future undiscounted
cash flows that the asset group is expected to generate. If the carrying amount of the asset group is greater than the net future
undiscounted cash flows, an impairment loss is recognized for the excess of the carrying amount of the asset group over its fair
value. The management of the Company has concluded that there were no impairment indicators relating to long-lived assets at March
31, 2013.





12







Results of Operations



Three Months Ended March 31, 2013 Compared to March 31,
2012



Revenues



Revenues were $31,000 and $0 for the three
months ended March 31, 2013 and 2012, respectively, an increase of $31,000. The revenues relate to collaborative agreements for
the joint operation of test plots to establish that Giant King Grass grows well in customer’s countries and optimal agronomic
practices are developed.



Cost of Revenues



Costs of revenues were $2,000 and $0 for
the three months ended March 31, 2013 and 2012, respectively, an increase of $2,000.  The costs relate to collaborative
agreements for the joint operation of test plots to establish that Giant King Grass grows well in customer’s countries and
optimal agronomic practices are developed.



Gross Profit



The resulting effect on these changes in
revenues and cost of revenues for the three months ended March 31, 2013 compared to the same period in 2012 was an increase in
gross profit from $0 for the three months ended March 31, 2012 to $29,000 for the three months ended March 31, 2013.



Operations Expenses



Operations expenses were $11,000 and $0
for the three months ended March 31, 2013 and 2012, respectively, an increase of $11,000.  Effective September 30, 2012,
the Company separated from VIASPACE Green Energy as described in Note 2, and started incurring its own expenses in the grass business.
Prior to September 30, 2012, the Company did not incur these costs. Operations expense is composed of plantation expenses related
to the Company’s test plot in California and costs associated with agronomy support and travel for potential customers.



Selling, General and Administrative
Expenses



Selling, general and administrative expenses
were $168,000 and $316,000 for the three months ended March 31, 2013 and 2012, respectively, a decrease of $148,000. Stock compensation
expense decreased $249,000 in 2013 as compared with 2012 as less stock was issued by the Company to pay its employees. Stock
option compensation expense decreased $29,000 in 2013 as compared with 2012 due to the completion of vesting of some stock option
grants in 2012. Payroll and benefits increased $86,000 for the three months ended March 31, 2013 as compared to the same period
in 2012 due to higher compensation levels in 2012 and the Company paying its employees in cash as opposed to stock. Consulting
increased $10,000 due to the Company hiring additional consultants in 2013 as compared to 2012. Public relations expenses increased
$6,000 in 2013 as the Company incurred increased investor relations expenses. Insurance expenses increased $15,000 in 2013 due
to increases in the Company directors and officers’ insurance costs. Other selling, general and administrative expenses,
net, increased by $13,000 for the three months ended March 31, 2013 compared with the same period in 2012.



Loss from Operations



The resulting effect on these changes in
gross profits, operations expenses, and selling, general and administrative expenses was a decrease in loss from operations in
2013. For the three months ended March 31, 2012, the Company had a loss from operations of $393,000 compared with a loss from operations
of $173,000 for the three months ended March 31, 2013, a decrease of $226,000.



Discontinued Operations



Loss from discontinued operations was $275,000
for the three months ended March 31, 2012 and $0 for the three months ended March 31, 2013. This loss from discontinued operations
relates to the losses of VGE, DMFCC and Ionfinity for the quarter ended March 31, 2012 as a result of each the Company eliminating
all ownership interests in each entity during 2012.



Liquidity and Capital Resources



The Company’s net loss for the three
months ended March 31, 2013 was $173,000. Non-cash expenses totaled $180,000 for the three months ended March 31, 2013 primarily
due to stock options, stock compensation expense, and amortization of debt discount. Changes in operating assets and liabilities
used $93,000 of cash in 2013.  Net cash used in operating activities for operations was $86,000 for the three months
ended March 31, 2013.





13







Net cash provided by financing activities
was $60,000 related to loans the Company received from Director Kevin Schewe.



The Company has incurred significant losses
from operations, resulting in an accumulated deficit of $48,963,000 at March 31, 2013. The Company expects such losses to continue.
However, on September 30, 2012, the Company entered into Loan Agreement with Director Kevin Schewe whereby Dr. Schewe agreed to
fund the Company up to $1,000,000 over the next five years. The Company expects loans from Dr. Schewe and contracts from the sublicense
to GKG to fund the operations for the foreseeable future. The Company expects to continue as a going concern, however no assurance
can be given that Dr. Schewe will continue to fund the Company or that contracts will be obtained in the future that will be profitable.



Contractual Obligations



There are no long-term contractual obligations
other than employment agreements as detailed below.



Employment Agreements



Effective October 1, 2012, the Company
entered into one-year employment agreements with Carl Kukkonen and Stephen Muzi. Dr. Kukkonen serves as Chief Executive Officer
of the Company and Mr. Muzi serves as Chief Financial Officer, Treasurer and Secretary. Dr. Kukkonen will receive a salary of $160,000
per annum and Mr. Muzi would receive $60,000 per annum. Each of them would also be entitled to a bonus
as determined by the Company’s Board of Directors, customary insurance and health benefits, and reimbursement for out-of-pocket
expenses in the course of his employment. Additionally, Dr. Kukkonen is to receive 20 business days paid leave per year and Mr.
Muzi is to receive 10 business days paid leave.



Inflation and Seasonality



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



Off-Balance Sheet Arrangements



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



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK



This information is not required of smaller
reporting companies.



ITEM 4. CONTROLS AND PROCEDURES



We maintain a system of disclosure controls and procedures that
are designed for the purpose of ensuring that information required to be disclosed in our SEC reports is recorded, processed, summarized
and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated
to the Company’s management, including the Chief Executive Officer and the Principal Accounting Officer, as appropriate to
allow timely decisions regarding required disclosures.



For the period ended March 31, 2013, we carried out an evaluation,
under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness
of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) under the
Exchange Act. In the course of this evaluation, our management considered the material weakness in our internal control over financial
reporting as discussed in our Annual Report on Form 10-K for the period ended December 31, 2012. Based on that evaluation, our
Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of the period covered by this report on Form
10-Q, our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in
reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods
specified in the SEC rules and forms and (ii) accumulated and communicated to the registrant’s management, including the
Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. To overcome
this weakness, our principal executive and financial officers have reviewed and provided additional substantive accounting information
and data in connection with the preparation of this quarterly report.  Therefore, despite the weaknesses identified, our principal
executive and financial officers believe that there are no material inaccuracies or omissions of material facts necessary to make
the statements included in this report not misleading in light of the circumstances under which they are made.





14







Changes in Internal Control over Financial Reporting



We will continue to monitor and evaluate the effectiveness of
our internal controls and procedures and our internal controls over financing reporting on an ongoing basis and are committed to
taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.



There have been no changes in our internal control over financial
reporting that occurred during the quarter ended March 31, 2013 that have materially affected, or were reasonably likely to materially
affect, our internal control over financial reporting.



PART II – OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS



The Company does not have any material legal proceedings as
of March 31, 2013.



ITEM 1A. RISK FACTORS



Risk Factors Which May Affect Future Results



The Company cautions that the following important factors, among
others, in some cases have affected and in the future could affect the Company’s actual results and could cause such results
to differ materially from those expressed in forward-looking statements made by or on behalf of the Company.



There have been no material changes to the risk factors included
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, other than as set forth below:



Risks Related To An Investment In Our Stock



Any future sale of a substantial number of shares of our
common stock could depress the trading price of our common stock, lower our value and make it more difficult
for us to raise capital.



Any sale of a substantial number of shares of our common stock
(or the prospect of sales) may depress the price of our common stock.  In particular, we will need to raise additional
capital to maintain any ongoing business. We anticipate that the issuance of newly-issued shares to maintain our business will
likely be very dilutive.  In addition, these sales could lower our value and make it more difficult for us to raise capital.  Further,
the timing of the sale of the shares of our common stock may occur at a time when we would otherwise be able to obtain additional
equity capital on terms more favorable to us.



The Company has 1,500,000,000 authorized shares of common stock,
of which 1,452,480,704 were issued and outstanding as of March 31, 2013. Of these issued and outstanding shares, 642,532,749 shares
(44.2%) are currently held by our executive officers, directors, and principal shareholders including related parties (including
Dr. Carl Kukkonen, CEO and Director; Mr. Stephen J. Muzi, CFO; Ms. Angelina Galiteva, Director; Dr. Kevin L. Schewe, Director;
Mr. Sung Hsien Chang, former director of the Company, and Inter Pacific Arts Corporation, a former subsidiary of the Company).  Of
the shares issued and outstanding at March 31, 2013, 591,505,329 are accounted by our transfer agent as restricted under Rule 144.  These
shares could be released in the future if requested by the holder of the shares, subject to volume and manner of sale restrictions
under Rule 144.  860,975,375 shares of the Company’s common stock are accounted for by our transfer agent as free
trading at March 31, 2013.



We cannot predict the size of future issuances of our common
stock or the effect, if any, that future issuances and sales of shares of our common stock will have on the market price of our
common stock.  Sales of substantial amounts of our common stock (including shares currently held by management and principal
shareholders), or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock.



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



On January 18, 2013, the Company issued
consultants 83,478 unregistered shares of the Company’s common stock for consulting services valued at $960.  On
February 26, 2013, the Company issued consultants 12,000,000 unregistered shares of the Company’s common stock for consulting
services valued at $168,000. The Company relied upon Section 4(2) of the Securities Act of 1933, as amended, for the offer and
sale of its stock. It believed that Section 4(2) was available because the offer and sale was not a public offering of its securities
and there was no general solicitation or general advertising involved in the offer or sale.





15







On January 31, 2013, the Company issued
2,127,660 unregistered shares of common stock to Kevin Schewe, Director of the Company. The shares were issued related to the conversion
by Schewe one convertible note as discussed in detail in Note 5. The Company relied upon Section 4(2) of the Securities Act of
1933, as amended, for the offer and sale of its stock. It believed that Section 4(2) was available because the offer and sale was
not a public offering of its securities and there was no general solicitation or general advertising involved in the offer or sale.



On February 25, 2013, the Company issued
1,769,912 unregistered shares of common stock to Kevin Schewe, Director of the Company. The shares were issued related to the conversion
by Schewe one convertible note as discussed in detail in Note 5. The Company relied upon Section 4(2) of the Securities Act of
1933, as amended, for the offer and sale of its stock. It believed that Section 4(2) was available because the offer and sale was
not a public offering of its securities and there was no general solicitation or general advertising involved in the offer or sale.



On March 28,
2013, the Company issued 1,680,672 unregistered shares of common stock to Kevin Schewe, Director of the Company. The shares were
issued related to the conversion by Schewe one convertible note as discussed in detail in Note 5. The Company relied upon Section
4(2) of the Securities Act of 1933, as amended, for the offer and sale of its stock. It believed that Section 4(2) was available
because the offer and sale was not a public offering of its securities and there was no general solicitation or general advertising
involved in the offer or sale.



ITEM 3. DEFAULTS UPON SENIOR SECURITIES



None.



ITEM 4. MINE SAFETY DISCLOSURES



None.



ITEM 5. OTHER INFORMATION



None.



ITEM 6. EXHIBITS



(a) Exhibits



|10.1    | Senior Secured Convertible Promissory Note dated January 30, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed January 31, 2013).  
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2    | Senior Secured Convertible Promissory Note dated February 25, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed February 25, 2013).
|10.3    | Senior Secured Convertible Promissory Note dated March 28, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed April 1, 2013).       
|10.4    | Senior Secured Convertible Promissory Note dated April 26, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed April 30, 2013).      
|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. *        
|99.1    | Temporary Hardship Exemption Provided by Rule 201 *                                                                                                              
|101.INS | XBRL Instance Document **                                                                                                                                        
|101.SCH | XBRL Schema Document **                                                                                                                                          
|101.CAL | XBRL Calculation Linkbase Document **                                                                                                                            
|101.DEF | XBRL Definition Linkbase Document **                                                                                                                             
|101.LAB | XBRL Label Linkbase Document **                                                                                                                                  
|101.PRE | XBRL Presentation Linkbase Document **                                                                                                                           



* Filed herewith.

** To be filed by amendment per Rule 201 of Regulation
S-T.



[SIGNATURES PAGE FOLLOWS]





16







SIGNATURES



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



|                   | VIASPACE Inc.
        (Registrant) |                                                                     
|------------------ | ---------------------------------- | --------------------------------------------------------------------
|                   |                                    |                                                                     
|Date: May 15, 2013 | By:                                | /s/ CARL KUKKONEN                                                   
|                   |                                    | Carl Kukkonen                                                       
|                   |                                    | Chief Executive Officer (Principal Executive Officer)               
|                   |                                    |                                                                     
|                   |                                    |                                                                     
|Date: May 15, 2013 | By:                                | /s/ STEPHEN J. MUZI                                                 
|                   |                                    | Stephen J. Muzi                                                     
|                   |                                    | Chief Financial Officer (Principal Financial and Accounting Officer)









17