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BEACON EQUITY RESEARCH Analyst: Victor Sula, PhD Report Update September 3rd, 2008 BSRC daily

09/02/08 0.50




BioSolar, Inc. 27936 Lost Canyon Road, Suite 202 Santa Clarita, CA 91387 volume

1.5 1.0 Investor Relations : (877) 904-3733



Tel : (661) 251-0001 Fax : (661) 251-0003





Market Data Symbol / Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .OTC BB: BSRC Current Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$0.34 Rating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Speculative Buy Price Target . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.37 Outstanding Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .132.7M Market Cap. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45.1M Average 3M Volume. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .155,142 . C o v e r a g e I n i t i a t e d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Jan . 7th, 2008

Company Introduction BioSolar Inc. (BSRC) develops innovative bio-components made from renewable plant sources. The Company’s technology can help reduce the per-watt manufacturing costs of; management anticipates substantial cost saving through the use of the Company’s bio-based in production. High-volume manufacturing of using bio-based components instead of petroleumbased plastic components may produce substantial cost savings, as well as environmental benefits. The Company targets the multi-billion dollar market for back sheets, substrates and superstrates, and expects to garner market share by capitalizing on the cost and application diversity advantages associated with its renewable components. Most of the solar industry is focused on improvements in photovoltaic efficiency as a means for reducing cost. BSRC is developing a new approach to cost reduction by replacing petroleum-based plastic components with durable and less expensive biobased materials. Please carefully read the risks and disclaimer section at the end of this report.

Analyst: Victor Sula, PhD Report Update September 3rd, 2008

Recent Developments BioSolar reveals details of BioBacksheet™ technology at SPIE Symposium BSRC chief technology officer Dr. Stanley Levy delivered a presentation at the SPIE Symposium on Solar Applications and Energy August 12, 2008, in San Diego, California, in which he discussed the Company’s proprietary BioBacksheet™, which is made from materials derived from cotton and castor beans. SPIE Optics+Photonics is the largest and most technically prestigious optical sciences and technology conference in North America. The Solar Energy and Applications track of the conference focuses on new technologies for creating secure, affordable, and environmentally sustainable energy to meet the world’s growing energy needs. BSRC’s BioBacksheet™ is made from renewable plant resources rather than traditional, expensive petroleum-based components and is less expensive than petroleum-based products. The resulting cost savings may allow photovoltaic cell manufacturers to reduce the cost of their finished product, thereby reducing the cost per watt of solar electricity. BioSolar evaluated materials from three sustainable resources for its PV backsheet development program: PLA made from corn, a cellulosic made from cotton, and a type of nylon made from castor beans. As cast, PLA film made from corn tended to be very brittle. This problem was solved with additives or biaxial orientation. Because it was UV-stable and highly transparent, PLA film merited consideration as a front glazing and backsheet material. However, its moisture resistance was not robust. A cellulosic film made from cotton was also considered; this film had a continuous duty temperature rating of 105 C. However, the cellulosic film product had to be modified significantly to convert it from a hydrophilic film to a hydrophobic one. Additionally, this material had an RTI value of 90C. Nylon 11, produced from castor beans was of interest because it is biosustainable but not biodegradable. It had improved moisture properties compared to more conventional nylons and had an RTI value of 105 C. Dr. Levy also updated the audience regarding the Company’s 18-month product development program focused on engineering a proprietary biobased backsheet from non-food, plant-based materials. BioSolar believes that the proprietary BioBacksheet™ it developed inhouse offers a viable alternative to conventional backsheets. According to BioSolar, the materials used in its BioBacksheet™ meet or exceed all testing and performance standards for the photovoltaic industry. In addition to being made from sustainable resources, BioSolar’s product will be more affordable than petroleum-based backsheets. Further testing is required before mass production can begin, but no fundamental problems have been Please carefully read the risks and disclaimer section at the end of this report.

BioSolar, Inc. (OTC BB: BSRC)


Analyst: Victor Sula, PhD Report Update September 3rd, 2008

identified so far with the BioSolar product. Damp heat testing The damp heat test is probably the most stringent test included in the IEC series of PV module qualification tests. It involves 1,000 hours of exposure to 85 C and 85% RH. The Company prepared several small modules for this test. On August 12, the modules were visually inspected after 250 hours in a damp heat oven. The modules appeared undamaged with no evidence of corrosion or adhesion failure. Partial discharge test This is a measure of backsheet dielectric strength run on the backsheet itself rather than on the entire module. Measurements were made on Randcastle films at the PV lab at Arizona State University. The values averaged around 700 volts and exceeded the current industry standard of 600 volts. BioSolar anticipates that the industry standard will soon become more stringent at 1,000 volts and plans to meet and/or exceed the new standard by increasing the thickness of its backsheet as part of the initial production run at Rowland Technologies. Wet Hypot test The wet insulation-resistance test, more commonly known as the wet Hypot test, is a leakage test performed on modules that have been immersed in a water surfactant solution for two minutes. Resistance is measured between the shorted-out leads of the module and the solution at 500 volts. To pass the test, this resistance must be greater than 400 megohms. This test is particularly stringent for basksheet materials. The resistance measurement for test modules made from BioSolar’s materials was 500 megohms. Bond strength test The strength of the bond between the backsheet and the EVA adhesive is an important issue for PV modules. ASTM Standard D-3807 (Standard Test Method for Strength Properties of Adhesives in Cleavage Peel by Tension Loading), more commonly referred to as the peel test, is used to measure this property. BioSolar prepared laminated samples for testing in the following configuration: backsheet/EVA/backsheet, leaving enough unbounded backsheet to be inserted into the jaws of an Instron tester.

Please carefully read the risks and disclaimer section at the end of this report.

BioSolar, Inc. (OTC BB: BSRC)


Analyst: Victor Sula, PhD Report Update September 3rd, 2008

Although the maximum peel strength was less than ideal, this does not present a major issue because the failure was cohesive rather than adhesive. That is, the bond strength of the cellulosic film to the EVA was greater than the inter-layer strength of the cellulosic. Similar cellulosic films have been used as dielectric material for almost 100 years and have not resulted in delamination problems. Media attention following BioBacksheet™ introduction BSRC attracted considerable media attention following the Company’s introduction of its proprietary BioBacksheet™, created from materials derived from cotton and castor beans. GreenTech Media reported that, following two years of secrecy, BSRC has unveiled a bio-based protective sheet for solar cells that could present a viable challenge to industry giant DuPont and its petroleum-based Tedlar product. In its Green Tech section, CNET noted BioSolar’s development of a plant-based plastic for the manufacture of more durable, affordable and sustainable solar equipment. United Press International hailed BioSolar’s BioBacksheet™ as “cleaner than clean energy,” and explained how BSRC “rids solar energy of carbon.” Scientific American discussed current solar energy industry conditions contributing to BSRC’s strong growth momentum, which include rising prices for oil and oil-based backsheets, and declared that BioSolar’s bio-based products open up a significant new market.

Financial Analysis Income statement The Company plans to commence full-scale production of its BioBacksheet™ in a state-of-the-art manufacturing facility operated by its contract manufacturing partner, Rowland Technologies Inc. BioSolar anticipates beginning full-scale production of its bio-based product and achieving meaningful revenues by year-end 2008. During the first six months of 2008, BSRC’s operating expenses totaled $472,876 and consisted mainly of administrative, sales and marketing and research and development expenses.

Income statement, $ H1 2007

H1 2008

% Chg

Revenue Operating Expenses Selling and Marketing expenses General and Administrative expenses Research & Development Depreciation and Amortization

0 280,410 18,944 160,829

0 472,876 158,511 250,945

n/m 69% 737% 56%

100,004 633

62,151 1,269

-38% 100%

Interest Income




Net Loss Diluted EPS

-258,253 -0.002

-459,873 -0.003

n/m n/m

Source: SEC filings.

Please carefully read the risks and disclaimer section at the end of this report.

BioSolar, Inc. (OTC BB: BSRC)


Analyst: Victor Sula, PhD Report Update September 3rd, 2008

Liquidity and capital resources Since its inception, the Company has relied on external financing to fund its operations. During the six months ended June 30, 2008, BSRC’s cash and cash equivalents declined by $233,004 as cash was used to finance operations.

Balance sheet $ 30-Sep-07




Cash and equivalents Net working capital Total Assets

148,115 886,076 888,820

340,484 1,064,07 1,083,667

115,997 854,042 879,357

107,480 674,847 768,189

Liabilities Equity, including Accumulated deficit

1,025 887,795 (708,833)

10,697 1,073,060 (1,122,068)

4,931 874,426 (1,320,072)

25,002 743,187 (1,581,940)

Source: SEC filings.

Over the next 12 months, BSRC plans to accelerate the development of its other components, build its first prototype solar cells and establish full-scale production. According to management, BSRC’s current cash and equivalents will be sufficient to support development activities and overhead expenses for the next twelve months. However, the Company will likely need to seek additional external financing, including equity and/or debt financing, to expand its R&D effort.

Financial Analysis Since our previous report, BSRC’s stock price has declined 17%, from $0.41 to $0.34, mainly due to slower-than-expected progress towards large-scale manufacturing. In June 2008, BSRC contracted with Rowland Technologies Inc., one of the leading manufacturers of high-quality plastic film and sheets, to initiate full-scale production of BioBacksheet™ solar cell components. The agreement with Rowland Technologies completes BSRC’s transition from a development-stage to a manufacturing company. BSRC is optimistic that it can begin full-scale production and report meaningful revenue by year-end 2008. The advantages of the Company’s bio-based technology were reiterated in a recent press release following Dr. Levy’s presentation at the SPIE Symposium. In rigorous testing, the Company’s BioBacksheet™ met or exceeded industry performance standards for corrosion resistance, dielectric strength, wet insulation resistance and durability. The results demonstrate that functional photovoltaic backsheets can be produced from renewable resources as a viable, cost- effective alternative to polyPlease carefully read the risks and disclaimer section at the end of this report.

BioSolar, Inc. (OTC BB: BSRC)


Analyst: Victor Sula, PhD Report Update September 3rd, 2008

silicon backsheets currently in use. The Company’s product also offers a timely alternative for solar cells manufacturers who are currently waiting six months or more to receive orders of conventional backsheet materials such as DuPont’s Tedlar. BioSolar CEO David Lee notes that the Company’s bio-based backsheet is more environmentally friendly than DuPont’s Tedlar, and will sell for at least 25% less than conventional backsheets currently priced at between $0.70-$1 per square foot. Prices for PV solar modules are escalating rapidly because of soaring oil prices. We think BioSolar is addressing an enormous market opportunity with its affordable and sustainable bio-based backsheet product. Accordingly, we are reiterating our Speculative Buy rating and $1.37 price target for BSRC shares.

Please carefully read the risks and disclaimer section at the end of this report.

BioSolar, Inc. (OTC BB: BSRC)


Analyst: Victor Sula, PhD Report Update September 3rd, 2008

Disclaimer DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. The information contained in our report should be viewed as commercial advertisement and is not intended to be investment advice. The report is not provided to any particular individual with a view toward their individual circumstances. The information contained in our report is not an offer to buy or sell securities. We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them. Our newsletter and website have been prepared for informational purposes only and are not intended to be used as a complete source of information on any particular company. 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You should consider these factors in evaluating the forward looking statements included in the report and not place undue reliance upon such statements. We are committed to providing factual information on the companies that are profiled. However, we do not provide any assurance as to the accuracy or completeness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions. We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so. Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable. To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information). We encourage you to invest carefully and read investment information available at the websites of the SEC at and FINRA at http:// All decisions are made solely by the analyst and independent of outside parties or influence. I, Victor Sula, Ph.D, the author of this report, certify that the material and views presented herein represent my personal opinion regarding the content and securities included in this report. In no way has my opinion been influenced by outside parties, nor has my compensation been either directly or indirectly tied to the performance of any security listed. I certify that I do not currently own, nor will own and shares or securities in any of the companies featured in this report.

Victor Sula, Ph.D. - Senior Analyst Victor Sula, Ph.D. has held the position of Senior Analyst with several independent investment research firms since 2004. Prior to 2004, Mr. Sula held Senior Financial Consultant positions within the World Bank sponsored Agency for Restructuring and Enterprise Assistance and TACIS sponsored Center for Productivity and Competitiveness of Moldova, where he was involved in corporate reorganization and liquidation. He is also employed as Associate Professor at the Academy of Economic Studies of Moldova. Mr. Sula earned his Ph.D. degree in 2001 and bachelor’s degree in Finance in 1997 from the Academy of Economic Studies of Moldova. Mr. Sula is currently a level III candidate in the CFA program.

BioSolar, Inc. (OTC BB: BSRC)


BEACON EQUITY RESEARCH Analyst: Victor Sula, PhD  
BEACON EQUITY RESEARCH Analyst: Victor Sula, PhD  

BioSolar, Inc. 27936 Lost Canyon Road, Suite 202 Santa Clarita, CA 91387 Investor Relations : (877) 904-...