UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549




FORM 10-K


(Mark One)




x           ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010


 ̈           TRANSITION REPORT UNDER SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


FOR THE TRANSITION PERIOD FROM __________ TO __________





COMMISSION FILE NUMBER: 333-138910





BIOSOLAR, INC.


(Name of registrant in its charter)





NEVADA
20-4754291(State or other jurisdiction of incorporation or

organization)
(I.R.S. Employer Identification No.)





27936 Lost Canyon Road, Suite 202, Santa Clarita, California 91387


(Address of principal executive offices) (Zip Code)





Issuer’s telephone Number: (661) 251-0001





Securities registered under Section 12(b) of the Exchange Act: None.





Securities registered under Section 12(g) of the Exchange Act: Common Stock: None





Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ̈ No x





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes  ̈  No x





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





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   ̈      No   ̈





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ̈





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





Large accelerated filer o
Accelerated fileroNon-accelerated filero(Do not check if smaller reporting company)
Smaller reporting company x





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x





The aggregate market value of the voting and non-voting common stock of the issuer held by non-affiliates computed by reference to the price at which the common stock was sold as of the June 30, 2010 was approximately $15,347,448.





The number of shares of registrant’s common stock outstanding, as of March 21, 2011 was 159,503,008.





DOCUMENTS INCORPORATED BY REFERENCE





None.









TABLE OF CONTENTS




PagePART IItem 1.

Description of Business

3Item 1A.

Risk Factors

6Item 2.

Properties

10Item 3.

Legal Proceedings

10Item 4.

Submission of Matters to a Vote of Security Holders

10PART IIItem 5.

Market for Common Equity and Related Stockholder Matters

10Item 6.

Selected Financial Data

12Item 7.

Management’s Discussion and Analysis or Plan of Operation

12Item 8.

Financial Statements and Supplementary Data

14Item 9.

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

14Item 9A.

Controls and Procedures

15Item 9B.

Other Information

15PART IIIItem 10.

Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act

16Item 11.

Executive Compensation

19Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

20Item 13.

Certain Relationship and Related Transactions

20Item 14.

Principal Accountant Fees and Services

21Item 15.

Exhibits

21SIGNATURES

22




2




PART I




ITEM 1.
DESCRIPTION OF BUSINESS.





Overview





We are developing an innovative technology to produce bio-based materials from renewable plant sources that will reduce the cost per watt of Photovoltaic solar modules. Most of the solar industry is focused on photovoltaic efficiency to reduce cost, but we are introducing a new dimension of cost reduction by replacing petroleum-based plastic solar module components with durable bio-based components. The process for producing electricity from sunlight is known as Photovoltaics. Photovoltaic ("PV") is the science of capturing and converting sun light into electricity.





We are focusing our research and product development efforts on producing bio-based components that meet the thermal and durability requirements of current solar module manufacturing processes for conventional crystalline cell designs as well as thin film PV devices in an effort to capitalize on what we perceive as cost advantages to current petroleum based solar cell components.





We are focusing our research and product development efforts on bio-based backsheets, substrates, superstrates, module and panel components.





Corporate Information and History





We were incorporated in the State of Nevada on April 24, 2006, as BioSolar Labs, Inc. Our name was changed to BioSolar, Inc. on June 8, 2006. Our principal executive offices are located at 27936 Lost Canyon Road, Suite 202, Santa Clarita, California 91387, and our telephone number is (661) 251-0001. Our fiscal year end is December 31.





Industry Overview





The solar industry relies on two distinctly different solar energy technologies. Solar energy can be converted directly into electricity using photovoltaic devices or into heat by solar thermal devices. Photovoltaic devices convert sunlight directly into electricity through a photovoltaic (PV) cell, commonly called a solar cell, a non-mechanical device usually made from silicon alloys. Solar thermal devices, on the other hand, are typically used for directly heating swimming pools, heating water for domestic use, and space heating of buildings.





Our product development focus is based on photovoltaic technology, thus we are currently a part of the photovoltaic segment of the industry. "Photovoltaics" is derived from the words photo, meaning light, and voltaic, meaning voltage producing. Sunlight, not heat, fuels photovoltaic cells. The cells, made mostly of the semiconductor silicon, convert sunlight directly into electricity.





There remains a variety of techniques for manufacturing the coatings needed to create solar cells. Emerging thin film cell manufacturing holds much promise because the coatings use less silicon than traditional films and can be manufactured at low cost and in large volume.





The simplest cells power watches and calculators; more complex systems provide power to the electric grid, and provide electricity to pump water, power communications equipment, light homes and run appliances.





In photovoltaics, light particles called photons penetrate the cell and knock electrons free from the silicon atoms, creating an electric current. As long as light flows into the cell, electrons flow out of the cell. The cell does not use up its electons and lose power, similar to a battery, as it is a converter that turns one kind of energy (sun light) into another (flowing electrons).




3




Photovoltaic cells are typically combined into modules that hold about 40 cells. Ten such modules are mounted in photovoltaic arrays. Such arrays can be used to generate electricity for a single building or, in large numbers, for a power plant.





Stand-alone photovoltaic systems produce power independently of the utility grid. In some off-the-grid locations, even one half kilometer from power lines, stand-alone photovoltaic systems can be more cost effective than extending power lines. They are especially appropriate for remote, environmentally sensitive areas, such as national parks, cabins, and remote homes.





In rural areas, small stand-alone solar arrays often power farm lighting, fence chargers for electric fences, and solar water pumps, which provide water for livestock. Some hybrid systems combine solar power with other power sources such as wind or diesel. Photovoltaic technology can be combined with construction materials and be built into a building rather than added on top of a building. In such building-integrated photovoltaics, photovoltaic systems are incorporated into or become elements of a building's structure.





Companies are manufacturing solar panels that look like construction materials, such as roof shingles. It is also possible to produce windows that have solar cells integrally constructed as part of the window surface or by placing thin films on the window.





Research and Development





BioSolar develops and produces robust bio-based components that meet the stringent thermal and durability requirements of current solar cell manufacturing processes. BioSolar intends to further develop biobased materials to be used directly in conventional manufacturing systems, such as injection molding and thin-film roll-to-roll, to create superstrate layer, substrate layer, backsheet as well as module and panel components.





One issue with the use of bio-based materials in solar panels is that most bio-based materials have much lower melting temperature and fragile molecular structure than those of conventional petroleum based plastic materials.   BioSolar’s strategy is to identify those biobased materials that are inherently durable, then apply proprietary material processes to enhance the desirable characteristics of these biobased materials – turning them into robust and durable materials to be used as solar panel components.  As a result, our latest BioBacksheet has been proven to be more durable than its conventional petroleum based backsheets in the market today.





We have developed multiple versions of our bio-based backsheet to date, and the latest version of the mono-layer Biobacksheet has successfully obtained Underwriters Laboratories’ (UL) material certification in February 2011.    This version of BioSolar Backsheet (BioBacksheetTM) is designed for conventional C-Si solar cell modules, which currently represents over 70 percent of solar modules produced in the world, as well as for certain thin film solar modules.  Subject to the issuance of provisional relative thermal index (RTI) rating by UL during the 2nd quarter of 2011, solar panel manufactuers will be able to submit
their panels incorporating BioBacksheet for UL/IEC certification (or recerficiation) before going into mass production.  These backsheets are available in rolls of film for direct use in lamination and roll-to-roll assembly systems. We project that backsheet can be manufacturered at significantly lower cost than those of traditional backsheets.





In addition, the company has an ongoing test program to determine the physical properties and characteristics that will be most suitable for commercially available solar cell devices, and build prototype solar panels, as we attempt to validate the commercial viability of this product in various forms.





Marketing Strategy





BioSolar, Inc. is developing a technology to produce bio-based materials from renewable plant sources that will reduce the cost per watt of solar cells.  Most of the solar industry is focused on photovoltaic efficiency to reduce cost.  BioSolar is the first company to introduce a new dimension of cost reduction by replacing petroleum-based plastic solar cell components with durable bio-based materials.  During first quarter of 2011, BioBacksheetTM, the company’s first commercially available product  obtained Underwriters Laboratories’ (UL) material certification, which is now a required step before solar panel
manufactuers can start incorporating the product into their solar panels for UL certification of their products.  Another version of BioBacksheetTM which enhanced capabilities are under development for commercialization in 2012.  Other related products are in the research and development stage.




4




We intend to market our bio-based solar module components directly to photovoltaic module manufacturers. In order to create a favorable environment for sales, we plan to undertake advertising and promotion efforts. These efforts will be outsourced and will require the services of advertising and public relations firms. We have tentavely chosen a firm whom we believe are capable of assisting us with comprehensive advertising and promotion plans. We have not yet finalized the potential costs of our marketing strategy.





Our marketing strategy includes working with various manufacturing partners in geographical target markets representing photovoltaic module manufactures.





Backlog of Orders





There are currently no orders for sales at this time.





Government Contracts





There are no government contracts at this time.





Compliance with Environmental Laws and Regulations





Our operations are subject to local, state and federal laws and regulations governing environmental quality and pollution control. To date, our compliance with these regulations has had no material effect on our operations, capital, earnings, or competitive position, and the cost of such compliance has not been material. We are unable to assess or predict at this time what effect additional regulations or legislation could have on our activities.





Manufacturing and Distribution





We currently do not have any mechanism for the manufacture and distribution of BioBacksheet within the company, nor do we have adequate financing to undertake these efforts on our own. We will be outsourcing manufacturing and distribution efforts to contract manufacturing and distributions firms.





Intellectual Property





On October 22, 2008, we filed a patent to protect the intellectual property rights for “Phovoltaic Laminated Module Backsheet, Films and Coatings for Use in Module Backsheet, and Processes for Making the Same”, application number 12/256,176.  The inventors listed on the patent application are Stanley Levy, the company’s Chief Technology Officer, and Josh Cottrell.  The company is listed as the assignee.





On April 26, 2010, BioSolar filed a U.S. Provisional Patent Application No. 61/327,862 titled, “photovoltaic Laminated Module Backsheet, Material for Use In Module Backsheet and Process for Making the Same.”  The sole inventor listed on the patent application is Stanley Levy, the company’s Chief Technology Officer.  The company is listed as the assignee.





Both applications are pending.





We rely upon confidentiality agreements signed by our employees, consultants and third parties to protect our intellectual property.





Competition





While there are a number of companies manufacturing backsheet and other plastic components for PV devices, such as Madico, Inc, we do not know of any employing the use of bio-based components.




5




Technology Development Partners





To assist us in the development of our technology, we intend to seek out and enter into technology development agreements with other entities with PV and bio-based materials expertise.





EMPLOYEES





As of March 21, 2011 we had two (2) full time employees. We have not experienced any work stoppages and we consider relations with our employees to be good.





ITEM 1A.
RISK FACTORS





WE HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU CAN BASE AN INVESTMENT DECISION.





Our company was formed on April 24, 2006 and therefore, we have a limited operating history upon which you can make an investment decision, or upon which we can accurately forecast future sales. You should, therefore, consider us subject to the business risks associated with a new business. The likelihood of our success must be considered in light of the expenses, difficulties and delays frequently encountered in connection with the formation and initial operations of a new business.





WE HAVE A LIMITED HISTORY OF LOSSES AND HAVE NEVER REALIZED REVENUES TO DATE. WE EXPECT TO CONTINUE TO INCUR LOSSES AND NO ASSURANCE CAN BE GIVEN THAT WE WILL REALIZE REVENUES.  ACCORDINGLY, WE MAY NEVER ACHIEVE AND SUSTAIN PROFITABILITY.





Since inception, we have incurred losses and have negative cash flows from operations and have never realized revenues. From inception through December 31, 2010, we incurred a net loss of $3,633,707 These factors, among others discussed in Note 1 to the financial statements, raise substantial doubt about the ability to continue as a going concern. We expect to continue to incur net losses until we are able to realize revenues to fund our continuing operations. We may fail to achieve any or significant revenues from sales or achieve or sustain profitability. Accordingly, there can be no assurance of when, if ever, we will be profitable or be able to maintain profitability.





WE ARE A DEVELOPMENT STAGE COMPANY AND MAY BE UNABLE TO MANAGE OUR GROWTH OR IMPLEMENT OUR EXPANSION STRATEGY IF WE ARE ABLE TO LAUNCH OUR PRODUCT AND SERVICE OFFERINGS.





We are a development stage company and may not be able to launch our product and service offerings, our client base and markets, or implement the other features of our business strategy at the rate or to the extent presently planned. If we are able to launch our product and service offerings, our projected growth will place a significant strain on our administrative, operational and financial resources. If we are unable to successfully manage our future growth, establish and upgrade our operating and financial control systems, recruit and hire necessary personnel or effectively manage unexpected expansion difficulties, our financial condition and results of operations could be materially and adversely affected.




6




WE MAY NOT BE ABLE TO SUCCESSFULLY DEVELOP AND COMMERCIALIZE OUR TECHNOLOGIES WHICH WOULD RESULT IN CONTINUED LOSSES AND OUR FINANCIAL CONDITION AND RESULTS OF OPERATION COULD BE MATERIALLY AND ADVERSELY AFFECTED.





While we have made progress in the development of our products, we have not generated any revenues and we are unable to project when we will achieve profitability, if at all. As is the case with any new technology, we are a development stage company and expect the development process to continue. We may not be able to create our product offering, develop a customer base and markets, or implement the other features of our business strategy at the rate or to the extent presently planned. Growth beyond the product development stage will place a significant strain on our administrative, operational and financial resources. In addition, our operations will not be able to move out of the development stage without additional funding. If we are unable to successfully finance our future growth, establish and
continue to upgrade our operating and financial control systems, recruit and hire necessary personnel or effectively manage unexpected expansion difficulties, our financial condition and results of operation could be materially and adversely affected.





OUR REVENUES ARE DEPENDENT UPON ACCEPTANCE OF OUR PRODUCTS BY THE MARKET; THE FAILURE OF WHICH WOULD CAUSE TO CURTAIL OR CEASE OPERATIONS.





We believe that virtually all of our revenues will come from the sale or license of our products. As a result, we will continue to incur substantial operating losses until such time as we are able to generate revenues from the sale or license of our products. There can be no assurance that businesses and customers will adopt our technology and products, or that businesses and prospective customers will agree to pay for or license our products. In the event that we are not able to significantly increase the number of customers that purchase or license our products, or if we are unable to charge the necessary prices or license fees, our financial condition and results of operations will be materially and adversely affected.





WE DO NOT MAINTAIN THEFT OR CASUALTY INSURANCE, AND ONLY MAINTAIN MODEST LIABILITY AND PROPERTY INSURANCE COVERAGE AND THEREFORE WE COULD INCUR LOSSES AS A RESULT OF AN UNINSURED LOSS.





We do not maintain theft or casualty insurance and we have modest liability and property insurance coverage. We cannot assure that we will not incur uninsured liabilities and losses as a result of the conduct of our business. Any such uninsured or insured loss or liability could have a material adverse affect on our results of operations.





IF WE LOSE KEY EMPLOYEES AND CONSULTANTS OR ARE UNABLE TO ATTRACT OR RETAIN QUALIFIED PERSONNEL, OUR BUSINESS COULD SUFFER.





Our success is highly dependent on our ability to attract and retain qualified scientific, engineering and management personnel. We are highly dependent on our management, including Mr. David Lee who has been critical to the development of our technologies and business. The loss of the services of Mr. Lee could have a material adverse effect on our operations. We do not have an employment agreement with Mr. Lee and do not maintain key man insurance with respect to Mr. Lee. Accordingly, there can be no assurance that he will remain associated with us. His efforts will be critical to us as we continue to develop our technology and as we attempt to transition from a development state company to a company with commercialized products and services. If we were to lose Mr. Lee, or any other key employees or
consultants, we may experience difficulties in competing effectively, developing our technology and implementing our business strategies.





THE LOSS OF STRATEGIC RELATIONSHIPS USED IN THE DEVELOPMENT OF OUR PRODUCTS AND TECHNOLOGY COULD IMPEDE OUR ABILITY TO COMPLETE OUR PRODUCT AND RESULT IN A MATERIAL ADVERSE EFFECT CAUSING THE BUSINESS TO SUFFER.





We may rely on strategic relationships with technology development partners to provide personnel, and expertise in the research and development of the technology and manufacturing process underlying our thin film PV product. A loss of these relationships for any reason could cause us to experience difficulties in completing the development of our product and implementing our business strategy. There can be no assurance that we could establish other relationships of adequate expertise in a timely manner or at all.




7




OUR PATENT APPLICATION FOR OUR TECHNOLOGY IS PENDING AND THERE IS NO ASSURANCE THAT THIS APPLICATION WILL BE GRANTED. FAILURE TO OBTAIN THE PATENT FOR OUR APPLICATION COULD PREVENT US FROM SECURING ROYALTY PAYMENTS IN THE FUTURE, IF APPROPRIATE.





We have filed a patent to protect the intellectual property rights for “A Method for Building Thin Film Flexible Solar Cells on Bio-Based Plastic Substrates”. To date our patent application has not been granted. We cannot be certain that this patent will be granted nor can we be certain that other companies have not filed for patent protection for this technology before us. Even if we are granted patent protection for our technology, there is no assurance that we will be in a position to enforce our patent rights. Failure to be granted patent protection for our technology could result in greater competition or in limited royalty payments. This could result in inadequate revenue and cause us to cease operations.





OUR CURRENT AND POTENTIAL COMPETITORS, SOME OF WHOM HAVE GREATER RESOURCES THAN WE DO, MAY DEVELOP PRODUCTS AND TECHNOLOGIES THAT MAY CAUSE DEMAND FOR, AND THE PRICES OF, OUR PRODUCTS TO DECLINE.





While there are a number of companies manufacturing components for PV devices, we do not know of any employing the use of bio-based materials. Furthermore, our competitors may combine with each other, and other companies may enter our markets by acquiring or entering into strategic relationships with our competitors. Current and potential competitors have established, or may establish, cooperative relationships among themselves or with third parties to increase the abilities of their PV components to address the needs of our prospective customers.





Many of our current and potential competitors have longer operating histories, significantly greater financial, technical, product development and marketing resources, greater name recognition and larger customer bases than we do. Our present or future competitors may be able to develop products comparable or superior to those we offer, adapt more quickly than we do to new technologies, evolving industry trends and standards or customer requirements, or devote greater resources to the development, promotion and sale of their products than we do. Accordingly, we may not be able to compete effectively in our markets, competition may intensify and future competition may harm our business.





WE ARE CONTROLLED BY CURRENT OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS.





Our directors, executive officers and principal stockholders and their affiliates beneficially own approximately 35.42% of the outstanding shares of our common stock. Accordingly, our executive officers, directors, principal stockholders and certain of their affiliates will have the ability to control the election of our Board of Directors and the outcome of matters submitted to a vote of our stockholders.





WORLDWIDE ECONOMIC CONDITIONS MAY IMPACT OUR FINANCIAL CONDITION AND OPERATING RESULTS.





In recent months, worldwide economic conditions have deteriorated significantly in the United States and other countries, and may remain depressed for the foreseeable future. These conditions make it difficult for us to accurately forecast and plan future business activities, and could cause us to slow or reduce spending on our research and development activities. Furthermore, during challenging economic times, we may face issues gaining timely access to financings or capital infusion, which could result in an impairment of our ability to continue our business activities. We cannot predict the timing, strength or duration of any economic slowdown or subsequent economic recovery, worldwide, in the United States, or in our industry. These and other economic factors could have a material adverse effect on our
financial condition and operating results.





Risks Related to Our Common Stock




BECAUSE THERE IS A LIMITED MARKET IN OUR COMMON STOCK, STOCKHOLDERS MAY HAVE DIFFICULTY IN SELLING OUR COMMON STOCK AND OUR COMMON STOCK MAY BE SUBJECT TO SIGNIFICANT PRICE SWINGS.





There is a very limited market for our common stock. Since trading commenced in February 2007, there has been little activity in our common stock and on some days there is no trading in our common stock. Because of the limited market for our common stock, the purchase or sale of a relatively small number of shares may have an exaggerated effect on the market price for our common stock. We cannot assure stockholders that they will be able to sell common stock or, that if they are able to sell their shares, that they will be able to sell the shares in any significant quantity at the quoted price.




8




IF WE FAIL TO REMAIN CURRENT ON OUR REPORTING REQUIREMENTS, WE COULD BE REMOVED FROM THE OTC BULLETIN BOARD WHICH WOULD LIMIT THE ABILITY OF BROKER-DEALERS TO SELL OUR SECURITIES AND THE ABILITY OF STOCKHOLDERS TO SELL THEIR SECURITIES IN THE SECONDARY MARKET.





Securities traded on the Over-The-Counter Bulletin Board must be registered with the Securities and Exchange Commission and the issuer must be current with its filings pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1933, as amended in order to maintain price quotation privileges on the OTC Bulletin Board. If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market. In addition, we may be unable to get re-listed on the OTC Bulletin Board, which may have an adverse material effect on our Company.





OUR COMMON STOCK IS SUBJECT TO THE “PENNY STOCK” RULES OF THE SEC AND THE TRADING MARKET IN OUR SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.





The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:





·
that a broker or dealer approve a person's account for transactions in penny stocks; and





·
the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.





In order to approve a person's account for transactions in penny stocks, the broker or dealer must:





·
obtain financial information and investment experience objectives of the person; and





·
make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.





The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:





·
sets forth the basis on which the broker or dealer made the suitability determination; and





·
that the broker or dealer received a signed, written agreement from the investor prior to the transaction.





Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.





Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.




9




WE DO NOT EXPECT TO PAY DIVIDENDS IN THE FUTURE; ANY RETURN ON INVESTMENT MAY BE LIMITED TO THE VALUE OF OUR COMMON STOCK.





We do not currently anticipate paying cash dividends in the foreseeable future. The payment of dividends on our Common Stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as the board of directors may consider relevant. Our current intention is to apply net earnings, if any, in the foreseeable future to increasing our capital base and development and marketing efforts. There can be no assurance that the Company will ever have sufficient earnings to declare and pay dividends to the holders of our Common Stock, and in any event, a decision to declare and pay dividends is at the sole discretion of the our Board of Directors. If we do not pay dividends, our Common Stock may be less valuable because a return on your investment will only occur if its
stock price appreciates.





ITEM 2.
PROPERTIES.





Our headquarters are located at 27936 Lost Canyon Road, Suite 202, Santa Clarita, California 91387. We lease our facility under a lease that expires on May 14, 2011. Our monthly lease payment is $534. The size of our office is 144 square feet.





ITEM 3.
LEGAL PROCEEDINGS.





We are not currently a party to, nor is any of our property currently the subject of, any pending legal proceeding that will have a material adverse effect on our business.





ITEM 4.
(REMOVE AND RESERVED)





PART II





ITEM 5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.





On February 22, 2007, our common stock became eligible for quotation on the NASD's OTC Bulletin Board under the symbol "BSRC."





For the periods indicated, the following table sets forth the high and low bid prices per share of common stock. These high and low bid prices represent prices quoted by broker-dealers on the OTC Bulletin Board. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.





Fiscal 2010


Fiscal 2009Quarter Ended

High


Low


High


LowMarch 31

$
0.16


$
0.10


$
0.22


$
0.111June 30

$
0.35


$
0.09


$
0.27


$
0.105September 30

$
0.23


$
0.12


$
0.22


$
0.15December 31

$
0.149


$
0.08


$
0.18


$
0.12




10




Common Stock





Our Amended Articles of Incorporation authorize the issuance of 500,000,000 shares of common stock, $.0001 par value per share. Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock have cumulative voting rights. Holders of shares of common stock are entitled to share ratably in dividends, if any, as may be declared, from time to time by the Board of Directors in its discretion, from funds legally available therefore. In the event of a liquidation, dissolution, or winding up of our company, the holders of shares of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities. Holders of common stock have no preemptive or other subscription rights, and there are no
conversion rights or redemption or sinking fund provisions with respect to such shares.





As of March 21, 2011, our common stock was held by 98 stockholders of record and we had 159,503,008 shares of common stock issued and outstanding. We believe that the number of beneficial owners is substantially greater than the number of record holders because a significant portion of our outstanding common stock is held of record in broker street names for the benefit of individual investors. The transfer agent of our common stock is Computershare Trust Company N.A., P.O. Box 43070, Providence, RI 02940-3070.





Dividend Policy





We have never declared or paid any cash dividends on our common stock. We do not anticipate paying any cash dividends to stockholders in the foreseeable future. In addition, any future determination to pay cash dividends will be at the discretion of the board of directors and will be dependent upon our financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deem relevant. There are no restrictions in our articles of incorporation or bylaws that restrict us from declaring dividends.





Securities Authorized for Issuance Under Equity Compensation Plan





The following table shows information with respect to each equity compensation plan under which our common stock is authorized for issuance as from inception (April 24, 2006) through December 31, 2010.




EQUITY COMPENSATION PLAN INFORMATION





Plan category

Number of securities

to be issued upon

exercise of

outstanding options,

warrants and rights


Weighted average

exercise price of

outstanding

options,

warrants and

rights


Number of

securities

remaining available

for future issuance

under equity

compensation plans

(excluding

Securities reflected

In column (a)(a)


(b)


(c)Equity compensation plans approved by security holders


-0-



-0-



-0-Equity compensation plans not approved by security holders


-0-



-0-



-0-Total


-0-



-0-



-0-





Unregistered Sales of Equity Securities





In May 2010, the Company issued 2,500,000 shares at a price of $0.08 per share for gross proceeds of $200,000.





In June 2010, the Company issued 800,000 shares at a price of $0.11 per share as compensation to outside contractors.




11




In September 2010, the Company issued 2,500,000 shares at $0.06 per share with warrants attached for gross proceeds of $150,000.





In December 2010, the Company issued 1,666,666 shares with warrants attached at price of $0.06 per share for gross proceeds of $100,000.





All of the above offerings and sales were deemed or determined by the Company to be exempt under rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as amended. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were accredited investors, business associates of the Company or executive officers of the Company and transfer was restricted by the Company in accordance with the requirements of the Securities Act of 1933. In addition to representations by the above-referenced persons, we have made independent determinations that all of the above-referenced persons were accredited or sophisticated investors, and that they were capable of analyzing the merits and risks of their investment, and
that they understood the speculative nature of their investment.





ITEM 6.
SELECTED FINANCIAL DATA


N/A





ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.





Special Note on Forward-Looking Statements.





Certain statements in “Management’s Discussion and Analysis or Plan of Operation” below, and elsewhere in this annual report, are not related to historical results, and are forward-looking statements. Forward-looking statements present our expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements frequently are accompanied by such words such as
“may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms or other words and terms of similar meaning. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, or timeliness of such results. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this annual report. Subsequent written and oral forward looking statements attributable to us or to persons acting in our behalf are expressly qualified in their entirety by the
cautionary statements and risk factors set forth below and elsewhere in this annual report, and in other reports filed by us with the SEC.





You should read the following description of our financial condition and results of operations in conjunction with the financial statements and accompanying notes included in this report beginning on page F-1.





Overview





We are developing an innovative technology to produce bio-based materials from renewable plant sources that will reduce the cost per watt of Photovoltaic solar cells.  Most of the solar industry is focused on photovoltaic efficiency to reduce cost, but we are introducing a new dimension of cost reduction by replacing petroleum-based plastic solar cell components with durable bio-based components.  The process for producing electricity from sunlight is known as Photovoltaics. Photovoltaic ("PV") is the science of capturing and converting sun light into electricity.




12




We are focusing our research and product development efforts on producing bio-based components that meet the thermal and durability requirements of current solar cell manufacturing processes for conventional crystalline cell designs as well as thin film PV devices in an effort to capitalize on what we perceive as cost advantages to current petroleum based solar cell components.





We are focusing our research and product development efforts on bio-based backsheets, substrates, superstrates, module, and panel components.





We were incorporated in the State of Nevada on April 24, 2006, as BioSolar Labs, Inc. Our name was changed to BioSolar, Inc. on June 8, 2006. Our principal executive offices are located at 27936 Lost Canyon Road, Suite 202, Santa Clarita, California 91387, and our telephone number is (661) 251-0001. Our fiscal year end is December 31.





RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 2010 COMPARED TO THE YEAR ENDED DECEMBER 31, 2009





GENERAL AND ADMINISTRATIVE EXPENSES





General and administrative ("G&A") expenses increased by $100,346 to $679,566 for the year ended December 31, 2010, compared to $579,220 for the prior year ended December 31, 2009. This increase in G&A expenses was the result of an increase in consulting fees for the managing director, and an increase in marketing cost to promote the Company.





RESEARCH AND DEVELOPMENT





Research and Development ("R&D") costs increased by $168,741, to $231,447 for the year ended December 31, 2010 compared to $62,706 for the prior year ended December 31, 2009. This increase in R&D costs was the result of an increase in outside services by corporations for testing the product, and an increase in materials and supplies to produce samples.





NET LOSS





Net Loss increased by $(274,792), to $(919,393) for the year ended December 31, 2010, compared to $(644,601) for the prior year ended December 31, 2009.  The increase in Net Loss was due to an increase in G&A and R&D expenses.  Currently the Company is in its development stage and had no revenues.





LIQUIDITY AND CAPITAL RESOURCES





As of December 31, 2010, we had $51,161 of working capital as compared to $462,726 for the prior year ended December 31, 2009. The decrease of $(411,565) in working capital was due primarily to less equity financing and use of capital for operating activities.





During the year ended December 31, 2010, the Company used $804,026 of cash for operating activities, as compared to $652,111 for the prior year ended December 31, 2009. The increase of $151,915 in the use of cash for operating activities was a result of an increase in net loss of $(274,792) due to an increase in research and development cost and public relations expenses. There were shares issued for services to outside consultants in the current year at a fair value of $88,000 compared to $0 issued in the prior year ended December 31, 2009. The decrease in inventory of $17,076 was due to utilizing the inventory on hand to produce samples of the technology for marketing.  Accounts payable increased by $2,973 due to accounting for professional fees and employee expenses paid after the year ended
December 31, 2010.




13




Cash provided by investing activities was $109,115 for the year ended December 31, 2010 as compared to cash provided of $187,949 for the prior year ended December 31, 2009. The decrease of cash provided by investing activities in the amount of $(78,834) for the current period was primarily due to a decrease of $(1,298) in the purchase of fixed and intangible assets, and the proceeds of $(77,536) transferred from certificate of deposits.





Cash provided from financing activities during the year ended December 31, 2010 was $450,000 as compared to $720,000 for the prior year ended December 31, 2009. Our capital needs have primarily been met from the proceeds of private placements, as we are currently in the development stage and have no revenues.





Our financial statements as of December 31, 2010 have been prepared under the assumption that we will continue as a going concern from inception (April 24, 2006) through December 31, 2010. Our independent registered public accounting firm has issued their report dated March 21, 2011 that included an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Our ability to continue as a going concern ultimately is dependent on our ability to generate a profit which is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and, ultimately, to achieve profitable operations. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.





PLAN OF OPERATION AND FINANCING NEEDS





We are engaged in the development of an innovative technology to produce bio-based materials from renewable plant sources that will reduce the cost per watt of Photovoltaic solar cells.  We plan to develop our products and thereafter focus our efforts on establishing markets in related sectors by 2011.





Our plan of operation within the next twelve months is to utilize our cash balances to fully commercialize our bio-based backsheet component (BioBacksheetTM) to replace the petroleum based backsheet in crystalline photovoltaic modules. In addition, we intend to further enhance test programs to determine the physical properties and characteristics that will be most suitable for the further development of biobased solar module components, and build solar panels, as we attempt to validate the commercial viability of our product. We believe that our current cash and investment balances will be sufficient to support development activity and general and administrative expenses for the next four months. Management estimates that it will
require additional cash resources during 2011, based upon its current operating plan and condition. We expect increased expenses during second half of 2011 as we ramp up sales and marketing efforts associated with gradual production volume increase.  We will be investigating additional financing alternatives, including equity and/or debt financing. There is no assurance that capital in any form would be available to us, and if available, on terms and conditions that are acceptable. If we are unable to obtain sufficient funds during the next fifteen months, we may be forced to reduce the size of our organization, which could have a material adverse impact on, or cause us to curtail and/or cease, the development of our products.





ITEM 8.
FINANCIAL STATEMENTS.





All financial information required by this Item is attached hereto at the end of this report beginning on page F-1 and is hereby incorporated by reference.





ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.





None




14





ITEM 9A.
CONTROLS AND PROCEDURES.





Evaluation of Disclosure Controls and Procedures.




We maintain "disclosure controls and procedures," as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and
operated, can provide only reasonable assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.





As of December 31, 2010, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in our periodic reports is recorded, processed, summarized and reported, within the time periods specified for each report and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required disclosure.





Management’s Report of Internal Control over Financial Reporting.




Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a - 15(f). Our internal control system was designed to provide reasonable assurance to our management and the Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, our management used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control - Integrated Framework - Guidance for Smaller Public Companies (the COSO criteria). Based on our assessment we believe that, as of December 31, 2010, our internal control over financial reporting is effective based on those criteria.





This annual report does not include an attestation report by HJ Associates & Consultants, LLP, our independent registered public accounting firm, regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to rules of the SEC that permits the Company to only provide management’s report in this Form 10-K.





Changes in Internal Control over Financial Reporting





There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





ITEM 9B.
OTHER INFORMATION.





None.




15




PART III





ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.





The following table sets forth information about our executive officers, key employees and directors.





Name

Age

PositionDavid Lee

51

Chief Executive Officer, Acting Chief Financial Officer and DirctorStanley Levy

71

Vice President and Chief Technology OfficerSteven C. Bartling

48

DirectorDennis LePon

63

Director





Directors serve until the next annual meeting and until their successors are elected and qualified. The Directors of our company are elected by the vote of a majority in interest of the holders of the voting stock of our company and hold office until the expiration of the term for which he or she was elected and until a successor has been elected and qualified.





A majority of the authorized number of directors constitutes a quorum of the Board for the transaction of business. The directors must be present at the meeting to constitute a quorum. However, any action required or permitted to be taken by the Board may be taken without a meeting if all members of the Board individually or collectively consent in writing to the action.





Directors receive compensation for their services and reimbursement for their expenses as shall be determined from time to time by resolution of the Board. Currently, our directors do not receive monetary compensation for their service on the Board of Directors.





Officers are appointed to serve for one year until the meeting of the board of directors following the annual meeting of stockholders and until their successors have been elected and qualified.





The principal occupations for the past five years (and, in some instances, for prior years) of each of our executive officers and directors, followed by our key employees, are as follows:





David Lee - Chief Executive Officer and Acting Chief Financial Officer and Director of the Company since inception (April 24, 2006). Dr. Lee has over 20 years of engineering, marketing, sales, and corporate management experience in the areas of military and consumer communication systems, automotive electronics, software development and consulting.  From 2004 to 2006, he was with Ramsey-Shilling Co. in the business of Commercial Real Estate Investment and Brokerage.  From 2000 to 2004, he served as Chief Operating Officer for Applied Reasoning, Inc., a Delaware company engaged in the business of Internet Software Development. From 1994 to 2000, he served as Vice Present and General Manager for RF-Link Technology, Inc., a California company engaged
in the business of Wireless Technology Development and Manufacturing. Dr. Lee received a Ph.D. in Electrical Engineering from Purdue University in 1989, a Master of Science in Electrical Engineering from University of Michigan in 1986 and a Bachelor of Science in Electrical Engineering from the University of Texas at Austin in 1984.





Stanley Levy - Vice President and Chief Technology Officer of the Company since August 2007. Dr. Levy has over 40 years of engineering and technical experience in the areas of plastics and film development. Dr. Levy spent 27 years at DuPont working on many of their premiere films, including Teflon, Mylar and Kapton. He holds 12 patents, his work has been published in numerous technical publications and he has received several awards for technical excellence. Prior to joining BioSolar, Dr. Levy was a consultant on module packaging for photovoltaic manufacturing companies including Global Solar, MiaSole, and Solar Integrated Technologies. In addition, he is a member of the National Renewable Energy Laboratory's Thin Film PV Module Reliability Team. Dr. Levy
holds a Ph.D in Mechanical Engineering from the University of Connecticut, a Master of Science in Mechanical Engineering from the University of Connecticut and a Bachelor of Science in Mechanical Engineering from the University of Rhode Island.




16




Steven C. Bartling – Director since May 11, 2006: Steven C. Bartling has over 25 years of engineering and corporate management experience in the areas of ultra high performance digital CMOS (Complementary Metal Oxide Semiconductor) circuit design, high performance microprocessor architecture/design, systems on a chip, packaging, and testing. From 2002 to the present, Mr. Bartling has been employed in ASIC (Application Specific Integrated Circuit) research and development for Texas Instruments, Inc. From 2001 to 2002, he served as Director of Custom Design for Celerence, an Oragon company engaged in the business of Optical Communication Networking. Mr. Bartling received a Master of Science in Electrical Engineering from Georgia Institute of Technology
in 1987 and a Bachelor of Science in Electrical Engineering from the University of Texas at Austin in 1985.  We concluded that Mr. Bartling’s wealth of technical and business experience he gained through his successful technical and corporate management career made him qualified to serve on the Board of Directors.  Mr. Bartling does not currently hold any other directorship.




Dennis LePon – Director since May 11, 2006: Dennis LePon has over 35 years of financial, managerial, and business experience working for a bank, real estate finance companies, as well as a start up high tech company. From 1992 to the present, Mr. LePon has served as Chief Financial officer of Catalyst Resource Group, Inc., a real estate finance and consulting firm offering specialized financing for healthcare, C-Store, gasoline station and other varied commercial properties nationwide.  From 2002 to 2004, he served as Chief Financial Officer for FoodMarket Place.com, a California company engaged in the business of Web Based marketing for food and restaurant industry partnered with Hewlett Packard. Mr. LePon received a Bachelor of Arts from
California State University at Northridge in 1969 and a Master of Business Administration from the University of Southern California in 1977.  We concluded that Mr. LePon’s strong financial and business experience he gained throughout his successful financial and corporate management career made him qualified to serve on the Board of Directors.  Mr. LePon does not currently hold any other directorship.





COMMITTEES OF THE BOARD





We currently have no audit committee, compensation committee, nominations and governance committee of our board of directors. We do not have an audit committee financial expert.





INDEBTEDNESS OF EXECUTIVE OFFICERS AND DIRECTORS





No executive officer, director or any member of these individuals' immediate families or any corporation or organization with whom any of these individuals is an affiliate is or has been indebted to us since the beginning of our last fiscal year.





FAMILY RELATIONSHIPS





There are no family relationships among our executive officers and directors.





CODE OF ETHICS





We have adopted a Code of Ethics that applies to all of our directors, officers and employees. The text of the Code of Ethics is filed as an exhibit to this annual report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission on March 25, 2008.  The Company will provide to any person without charge, upon request to the Company at its office, a copy of the Code of Ethics. Any waiver of the provisions of the Code of Ethics for executive officers and directors may be made only by the Audit Committee and, in the case of a waiver for members of the Audit Committee, by the Board of Directors.  Any such waivers will be promptly disclosed to our shareholders.




17




LEGAL PROCEEDINGS





To our knowledge, during the past ten years, none of our directors, executive officers, promoters, control persons, or nominees has been:


·
the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;




·
convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);




·
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or any Federal or State authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;




·
found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law.




·
the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of (a) any Federal or State securities or commodities law or regulation; (b) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or (c) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or




·
the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.





Board Leadership Structure and Role in Risk Oversight





Although we have not adopted a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined, we have traditionally determined that it is in the best interests of the Company and its shareholders to combine these roles.   Due to the small size and early stage of the Company, we believe it is currently most effective to have the Chairman and Chief Executive Officer positions combined. In addition, having one person serve as both Chairman and Chief Executive Officer eliminates potential for confusion and provides clear leadership for the Company, with a single person setting the tone and managing our operations. The Board oversees specific risks, including, but not limited to:





•
appointing, retaining and overseeing the work of the independent auditors, including resolving disagreements between the management and the independent auditors relating to financial reporting;





•
approving all auditing and non-auditing services permitted to be performed by the independent auditors;





•
reviewing annually the independence and quality control procedures of the independent auditors;





•
reviewing, approving, and overseeing risks arising from proposed related party transactions;





•
discussing the annual audited financial statements with the management;





•
meeting separately with the independent auditors to discuss critical accounting policies, management letters, recommendations on internal controls, the auditor’s engagement letter and independence letter and other material written communications between the independent auditors and the management; and




18




•
monitoring the risks associated with management resources, structure, succession planning, development and selection processes, including evaluating the effect the compensation structure may have on risk decisions.





ITEM 11.
EXECUTIVE COMPENSATION.




The following table summarizes all compensation recorded by us in each of the last two completed fiscal years for our principal executive officer, our two most highly compensated executive officers other than the Company’s principal executive officer, and up to two additional individuals for whom disclosure would have been made in this table but for the fact that the individual was not serving as an executive officer of our company at December 31, 2010.




Name and Principal Position

Year

Salary

($)


Bonus

($)


Stock

Awards


Option

Awards

($)


Non-

Equity

Incentive

Plan

Compensation

($)


Non-Qualified

Deferred

Compensation


All Other

Compensation

($)


Total

($)David Lee - CEO and

2010

$
144,000



0



0



0



0



0



0


$
144,000Acting CFO

2009

$
144,000



0



0



0



0



0



0


$
144,000Stanley Levy – CTO

2010

$
132,000



0



0



0



0



0



0


$
132,0002009

$
132,000



0



0



0



0



0



0


$
132,000




Employment Agreements




The Company currently has no employment agreements with its executive officers.




Employee Benefit Plans




The Company currently has no health plan for its employees.




Stock Option Plan




The Company has no stock option plan.




Election and Compensation of Directors




The Directors of the Company are elected by the vote of a majority in interest of the holders of the voting stock of the Company and hold office until the expiration of the term for which he or she was elected and until a successor has been elected and qualified.




A majority of the authorized number of directors constitutes a quorum of the Board for the transaction of business.  The directors must be present at the meeting to constitute a quorum.  However, any action required or permitted to be taken by the Board may be taken without a meeting if all members of the Board individually or collectively consent in writing to the action.




The Company’s directors currently do not receive monetary compensation for their service on the Board of Directors.  Directors may receive compensation for their services in the future and reimbursement for their expenses as shall be determined from time to time by resolution of the Board.





19





Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT





The following table sets forth, as of March 21, 2011, the number of and percent of our common stock beneficially owned by:





·  all directors and nominees, naming them,





·  our executive officers,





·  our directors and executive officers as a group, without naming them, and





·  persons or groups known by us to own beneficially 5% or more of our common stock:





We believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them.





A person is deemed to be the beneficial owner of securities that can be acquired by him within 60 days from March 21, 2011 upon the exercise of options, warrants or convertible securities. Each beneficial owner's percentage ownership is determined by assuming that options, warrants or convertible securities that are held by him, but not those held by any other person, and which are exercisable within 60 days of March 21, 2011 have been exercised and converted.





Title of Class

Name of

Beneficial Owner

Number of

Shares

Beneficially

Owned


Percent of Total

(1)Common Stock

David Lee


49,500,000



31.0
%Common Stock

Stanley Levy


5,000,000



3.13
%Common Stock

Steven C. Bartling


1,000,000



*Common Stock

Dennis LePon


1,000,000



*Common Stock

All Executive Officers and Directors as a Group (4 persons )


56,500,000



35.4
%





*Less than one percent.





(1) Based upon 159,503,008 shares issued and outstanding as of March 21, 2011.





ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.





There were no material related party transactions which we entered into from inception (April 24, 2006) to December 31, 2010.





Director Independence





Steven Bartling is independent as that term is defined under the NASDAQ Marketplace Rules.




20




ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.





Audit Fees





The aggregate fees billable to us by HJ Associates & Consultants, LLP during 2010 and 2009 for the audits of our annual financial statements for the fiscal year totaled approximately $16,890 and $19,900, respectively.





Audit-Related Fees





We did not incur assurance and audit-related fees during 2010 and 2009, to HJ Associates & Consultants, LLP in connection with the audit of our financial statements from April 24, 2006 (Inception) through December 31, 2010 for the reviews of registration statements and issuance of related consents and assistance with SEC comment letters.





Tax Fees





We did not incur fees for tax compliance, tax advice, or tax planning for the fiscal year ended December 31, 2010 and December 31, 2009, respectively.





All Other Fees





There were no fees billed to us by HJ Associates & Consultants, LLP for services rendered to us during the last two fiscal years, other than the services described above under “Audit Fees” and “Audit-Related Fees.”





As of the date of this filing, our current policy is to not engage HJ Associates & Consultants, LLP to provide, among other things, bookkeeping services, appraisal or valuation services, or international audit services. The policy provides that we engage HJ Associates & Consultants, LLP to provide audit, tax, and other assurance services, such as review of SEC reports or filings.





ITEM 15.
EXHIBITS.




Exhibit No.

Description3.1

Articles of Incorporation of Biosolar Labs, Inc. filed with the Nevada Secretary of State on April 24, 2006. ( Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed with the SEC on November 22, 2006)3.2

Articles of Amendment of Articles of Incorporation of Biosolar Labs, Inc. filed with the Nevada Secretary of State on May 25, 2006.( Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed with the SEC on November 22, 2006)3.3

Articles of Amendment of Articles of Incorporation of Biosolar Labs, Inc. filed with the Nevada Secretary of State on June 8, 2006. ( Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed with the SEC on November 22, 2006)3.4

Bylaws of Biosolar, Inc.( Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed with the SEC on November 22, 2006)


MATERIAL CONTRACTS




10.1

Form of Subscription Agreement dated as of May 26, 2006. ( Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed with the SEC on November 22, 2006)10.2

Form of Subscription Agreement dated as of July 17, 2006. ( Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed with the SEC on November 22, 2006)10.3

Form of Subscription Agreement dated as of October 11, 2006. ( Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed with the SEC on November 22, 2006)14.1

Code of Ethics ( Incorporated by reference to the Company’s annual report on Form 10-K filed with the SEC on March 25, 2008)31.1

Certification by Chief Executive Officer and Acting Chief Financial Officer pursuant to Sarbanes-Oxley Section 302 (filed herewith).32.1

Certification by Chief Executive Officer and Acting Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (filed herewith).




21




SIGNATURES





In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California, on March 21, 2011.





Biosolar, Inc.By:
/s/ David LeeCHIEF EXECUTIVE OFFICER (PRINCIPAL

EXECUTIVE OFFICER) AND ACTING CHIEF

FINANCIAL OFFICER (PRINCIPAL

ACCOUNTING AND FINANCIAL OFFICER)





Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated:





SIGNATURE

TITLE

DATE/S/ DAVID LEE

CHIEF EXECUTIVE OFFICER

MARCH 21, 2011DAVID LEE

(PRINCIPAL EXECUTIVE OFFICER),

ACTING CHIEF FINANCIAL OFFICER(PRINCIPAL ACCOUNTING ANDFINANCIAL OFFICER) ANDCHAIRMAN OF THE BOARD/S/ DENNIS LEPON

DIRECTORDENNIS LEPON



MARCH 21, 2011




22




Report of Independent Registered Public Accounting Firm




To the Board of Directors and Shareholders


BioSolar, Inc.


(A Development Stage Company)


Santa Clarita, California




We have audited the accompanying balance sheets of BioSolar, Inc. (a development stage company) as of December 31, 2010 and 2009, and the related statements of operations, stockholders’ equity and cash flows for each of the two years then ended, and from inception of the development stage on April 24, 2006 through December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.





We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.





In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of BioSolar, Inc. (a development stage company) as of December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the two years ended December 31, 2010 and 2009, and from inception of the development stage on April 24, 2006 through December 31, 2010, in conformity with U.S. generally accepted accounting principles.





The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company does not generate revenue and has negative cash flows from operations. This raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.




HJ Associates & Consultants, LLP


HJ Associates & Consultants, LLP


Salt Lake City, Utah


March 21, 2011




F-1




BIOSOLAR, INC.


(A Development Stage Company)


BALANCE SHEETS





December 31, 2010


December 31, 2009ASSETSCURRENT ASSETSCash & cash equivalents

$
44,318


$
289,229Certificates of deposits


-



147,288Inventory, raw materials


-



17,076Prepaid expenses


12,349



12,416TOTAL CURRENT ASSETS


56,667



466,009PROPERTY AND EQUIPMENTMachinery and equipment


76,281



74,643Computer


2,928



1,97879,209



76,621Less accumulated depreciation


(18,639
)


(10,638
)NET PROPERTY AND EQUIPMENT


60,570



65,983OTHER ASSETSPatents, net of amortization of $40


121,919



86,334Deposit


770



770TOTAL OTHER ASSETS


122,689



87,104TOTAL ASSETS

$
239,926


$
619,096LIABILITIES AND SHAREHOLDER'S EQUITYCURRENT LIABILITIESAccounts payable

$
5,506


$
2,533Accrued expense


-



750TOTAL CURRENT LIABILITIES


5,506



3,283SHAREHOLDER'S EQUITYCommon stock, $0.0001 par value;500,000,000 authorized common shares155,233,443 and 147,766,777 shares issued and outstanding, respectively


15,523



14,776Additional paid in capital


3,852,604



3,315,351Deficit accumulated during the development stage


(3,633,707
)


(2,714,314
)TOTAL SHAREHOLDER'S EQUITY


234,420



615,813TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY

$
239,926


$
619,096





The accompanying notes are an integral part of these financial statements





F-2




BIOSOLAR, INC.


(A Development Stage Company)


STATEMENTS OF OPERATIONS





From InceptionApril 24, 2006Year Ended


throughDecember 31, 2010


December 31, 2009


December 31, 2010REVENUE

$
-


$
-


$
-OPERATING EXPENSESGeneral and administrative expenses


679,566



579,220



3,003,974Research and development


231,447



62,706



694,818Depreciation and amortization


8,001



5,991



18,679TOTAL OPERATING EXPENSES


919,014



647,917



3,717,471LOSS FROM OPERATIONS BEFORE  OTHER INCOME


(919,014
)


(647,917
)


(3,717,471
)TOTAL OTHER INCOME/(EXPENSES)Interest income


601



4,116



87,144Penalties


(180
)


-



(180
)TOTAL OTHER INCOME/(EXPENSES)


421



4,116



86,964LOSS BEFORE PROVISION FOR TAXES


(918,593
)


(643,801
)


(3,630,507
)Income taxes


(800
)


(800
)


(3,200
)NET LOSS

$
(919,393
)

$
(644,601
)

$
(3,633,707
)BASIC AND DILUTED LOSS PER SHARE

$
(0.01
)

$
(0.00
)WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED


150,817,919



138,258,832





The accompanying notes are an integral part of these financial statements





F-3




BIOSOLAR, INC.


(A Development Stage Company)


STATEMENTS OF SHAREHOLDER'S EQUITY




DeficitAccumulatedAdditional





during theCommon stock


Paid-in


Subscription


DevelopmentShares


Amount


Capital


Payable


Stage


TotalInception April 24, 2006


-


$
-


$
-


$
-


$
-


$
-Issuance of common stock in April 2006 for services (1,000 common shares issued at $0.001 per share )


1,000



1



-







-



1Issuance of founders shares in May 2006 for cash (29,999,000 common shares issued at $0.00025 per share )


29,999,000



2,999



4,500







-



7,499Issuance of founders shares in May 2006 for cash (20,000,000 common shares issued at $0.00025 per share )


20,000,000



2,000



3,000







-



5,000Issuance of founders shares in May 2006 for cash (9,000,000 common shares issued at $0.00025 per share )


9,000,000



900



1,350







-



2,000Issuance of common stock in May 2006 for cash (25,000,000 common shares issued at $0.015 per share )


25,000,000



2,500



372,500







-



375,000Issuance of founders shares in June 2006 for cash (34,000,000 common shares issued at $0.00025 per share )


34,000,000



3,400



5,100







-



8,500Issuance of common shares in June 2006 for cash (90,000 common shares issued at $0.10 per share )


90,000



9



8,991







-



9,000Stocks subscribed


-



-



-







-



250Issuance of common shares in July 2006 for cash (5,760,000 common shares issued at $0.10 per share )


5,760,000



576



575,424







-



576,000Issuance of common shares in August 2006 for cash (2,807,777 common shares issued at $0.10 per share )


2,807,777



281



280,497







-



280,778Issuance of common shares in September 2006 for cash (1,450,000 common shares issued at $0.10 per share )


1,450,000



145



144,855







-



145,000Issuance of common shares in October 2006 for cash (450,000 common shares issued at $0.10 per share )


450,000



45



44,955







-



45,000Net Loss from Inception through December 31, 2006


-



-



-







(274,361
)


(274,361
)Balance at December 31, 2006


128,557,777



12,856



1,441,172







(274,361
)


1,179,667Issuance of common shares in September 2007 for cash (250,000 common shares issued at $0.20 per share )


250,000



25



49,975







-



50,000Issuance of common shares in September 2007 for cash (50,000 common shares issued at $0.20 per share )


50,000



5



9,995







-



10,000Issuance of common shares in September 2007 for services (100,000 common shares issued at $0.35 per share )


100,000



10



34,990







-



35,000Issuance of common shares in September 2007 for services (100,000 common shares issued at $0.26 per share )


100,000



10



25,990







-



26,000Issuance of common shares in September 2007 for services (40,000 common shares issued at $0.54 per share )


40,000



4



21,596







-



21,600Issuance of common shares in October 2007 for services (4,000 common shares issued at $0.54 per share )


4,000



0



2,160







-



2,160Issuance of common shares in October 2007 for cash (1,175,000 common shares issued at $0.20 per share )


1,175,000



117



234,883







-



235,000Issuance of common shares in October 2007 for services (250,000 common shares issued at $0.51 per share )


250,000



25



127,475







-



127,500Issuance of common shares in November 2007 for cash (1,180,000 common shares issued at $0.20 per share )


1,180,000



118



235,882







-



236,000Stock issuance cost


-



-



(2,160
)






-



(2,160
)Net Loss for the year ended December 31, 2007


-



-



-







(847,706
)


(847,706
)Balance at December 31, 2007


131,706,777



13,170



2,181,958







(1,122,067
)


1,073,061Issuance of common shares in June 2008 for cash (520,000 common shares issued at $0.25 per share )


520,000



52



129,948







-



130,000Issuance of common shares in July 2008 for cash (440,000 common shares issued at $0.25 per share )


440,000



44



109,956







-



110,000Issuance of common shares in August 2008 for cash (80,000 common shares issued at $0.25 per share )


80,000



8



19,992







-



20,000Issuance of common shares in September 2008 for cash (520,000 common shares issued at $0.25 per share )


520,000



52



129,948







-



130,000Issuance of common shares in October 2008 for services (100,000 common shares issued at $0.25 per share )


100,000



10



24,990







-



25,000Net Loss for the year ended December 31, 2008


-



-



-







(947,646
)


(947,646
)Balance at December 31, 2008


133,366,777



13,336



2,596,791



-



(2,069,713
)


540,414Common stock subscription payable


-



-



-



203,000



-



203,000Issuance of common shares in September 2009 for cash (4,060,000 common shares issued at $0.05 per share )


4,060,000



406



202,594



(203,000
)


-



-Issuance of common shares in September 2009 for cash (3,200,000 common shares issued at $0.05 per share )


3,200,000



320



159,680



-



-



160,000Issuance of common shares in September 2009 for cash (7,140,000 common shares issued at $0.05 per share )


7,140,000



714



356,286



-



-



357,000Net Loss for the year ended December 31, 2009


-



-



-







(644,601
)


(644,601
)Balance at December 31, 2009


147,766,777



14,776



3,315,351



-



(2,714,314
)


615,813Issuance of common shares in May 2010 for services (800,000 common shares issued at a fair value of $0.11 per share)


800,000



80



87,920



-



-



88,000Issuance of common shares in May 2010 for cash (2,500,000 common shares issued at a price of $0.08 per share)


2,500,000



250



199,750



-



-



200,000Issuance of common shares in September 2010 for cash (2,500,000 common shares issued at a price of $0.06 per share)


2,500,000



250



149,750



-



-



150,000Issuance of common shares in December 2010 for cash (833,333 common shares issued at a price of $0.06 per share)


833,333



84



49,916



-



-



50,000Issuance of common shares in December 2010 for cash (833,333 common shares issued at a price of $0.06 per share)


833,333



83



49,917



-



-



50,000Net loss for the year ended December 31, 2010


-



-



-



-



(919,393
)


(919,393
)Balance at December 31, 2010


155,233,443


$
15,523


$
3,852,604


$
-


$
(3,633,707
)

$
234,420


The accompanying notes are an integral part of these financial statements





F-4




BIOSOLAR, INC.


(A Development Stage Company)


STATEMENTS OF CASH FLOWS





From InceptionApril 24, 2006Year Ended


throughDecember 31, 2010


December 31, 2009


December 31, 2010CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(919,393
)

$
(644,601
)

$
(3,633,707
)Adjustment to reconcile net loss to net cash used in operating activitiesDepreciation expense


8,001



5,991



18,679Issuance of stock for services


88,000



-



325,260Changes in Assets and Liabilities(Increase) Decrease in:Inventory


17,076



7,694



-Prepaid expenses


67



(3,678
)


(12,349
)Deposits


-



-



(770
)Increase (Decrease) in:Accounts payable


2,973



(18,267
)


5,506Accrued expenses


(750
)


750



-Credit card payable


-



-



-NET CASH USED IN OPERATING ACTIVITIES


(804,026
)


(652,111
)


(3,297,381
)CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of equipment


(2,588
)


(25,513
)


(79,209
)Patent expenditures


(35,585
)


(11,362
)


(121,959
)Proceeds from /(investments in) certificate of deposits


147,288



224,824



-NET CASH PROVIDED/(USED) IN INVESTING ACTIVITIES


109,115



187,949



(201,168
)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from common stock subcription payable


-



203,000



203,000Proceeds from issuance of common stock


450,000



517,000



3,339,867NET CASH PROVIDED IN FINANCING ACTIVITIES


450,000



720,000



3,542,867NET INCREASE/(DECREASE) IN CASH


(244,911
)


255,838



44,318CASH, BEGINNING OF YEAR


289,229



33,391



-CASH, END OF YEAR


44,318



289,229



44,318SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONInterest paid

$
-


$
-


$
-Taxes paid

$
800


$
800


$
3,200SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONSCommon stock issued for prepaid services

$
5,867


$
-


$
5,867





The accompanying notes are an integral part of these financial statements




F-5




BIOSOLAR, INC.


(A Development Stage Company)


NOTES TO FINANCIAL STATEMENTS


DECEMBER 31, 2010 AND 2009





1.
ORGANIZATION AND LINE OF BUSINESS





Organization


BioSolar, Inc. (the "Company") was incorporated in the state of Nevada on April 24, 2006.  The Company, based in Santa Clarita, California, began operations on April 25, 2006 to develop and market solar panel component made from renewable materials.





Line of Business


The Company is currently in the stage of developing an innovative technology to produce bio-based photovoltaic components from renewable plant sources that will reduce the cost per watt of Photovoltaic solar cells. The biobased photovoltaic components will be directly marketed to photovoltaic module manufacturers.





Going Concern


The accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business.  The accompanying financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern.  The Company does not generate revenue, and has negative cash flows from operations, which raise substantial doubt about the Company’s ability to continue as a going concern.  The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusion.  The Company has obtained funds from its
shareholders since its inception through the year ended December 31, 2010. Management believes this funding will continue, and has also obtained funding from new investors.  Management believes the existing shareholders and the prospective new investors will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow the development of its core of business.





2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





This summary of significant accounting policies of BioSolar, Inc. is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.





Development Stage Activities and Operations


The Company has been in its initial stages of formation and for the year ended December 31, 2010, had no revenues. A development stage activity is one in which all efforts are devoted substantially to establishing a new business and even if planned principal operations have commenced, revenues are insignificant.





Revenue Recognition


The Company will recognize revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. To date, the Company has had no revenues and is in the development stage.





Cash and Cash Equivalent


The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.




F-6




BIOSOLAR, INC.


(A Development Stage Company)


NOTES TO FINANCIAL STATEMENTS


DECEMBER 31, 2010 AND 2009





2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





Investments


Certificate of Deposits with banking institutions are short-term investments with initial maturities of more than 90 days. The carrying amount of these investments is a reasonable estimate of fair value due to their short-term nature.




Use of Estimates




The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements.  Significant estimates made in preparing these financial statements include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, and the fair value of stock options. Actual results could differ from those estimates.





Property and Equipment


Property and equipment are stated at cost, and are depreciated using straight line over its estimated useful lives:





Computer equipment

5 YearsMachinery & equipment

10 Years





Depreciation expense for the years ended December 31, 2010 and 2009 was $8,001 and $5,991, respectively.





Fair Value of Financial Instruments


Fair Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of December 31, 2010 and 2009, the amounts reported for cash, inventory, prepaid expenses, accounts payable, and accrued expenses, approximate the fair value because of their short maturities.





Loss per Share Calculations


Loss per Share dictates the calculation of basic earnings per share and diluted earnings per share. Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. No shares for employee options or warrants were used in the calculation of the loss per share as they were all anti-dilutive. The Company’s diluted loss per share is the same as the basic loss per share for the years ended December 31, 2010 and 2009, as the inclusion of
any potential shares would have had an anti-dilutive effect due to the Company generating a loss. The Company has excluded 5,000,000 and 0 warrants for the years ended December 31, 2010 and 2009, respectively.





Income Taxes


The Company uses the liability method of accounting for income taxes.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards.  The measurement of deferred tax assets and liabilities is based on provisions of applicable tax law.  The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance based on the amount of tax benefits that, based on available evidence, is not expected to be realized.




F-7




BIOSOLAR, INC.


(A Development Stage Company)


NOTES TO FINANCIAL STATEMENTS


DECEMBER 31, 2010 AND 2009





2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)




Research and Development




Research and development costs are expensed as incurred.  Total research and development costs were $231,447 and $62,706 for the years ended December 31, 2010 and 2009, respectively.





Advertising Costs


The Company expenses the cost of advertising and promotional materials when incurred.  Total advertising costs were $7,799 and $18,430 for the years ended December 31, 2010 and 2009, respectively.





Stock based Compensation


Share based payments applies to transactions in which an entity exchanges its equity instruments for goods or services, and also applies to liabilities an entity may incur for goods or services that are to follow a fair value of those equity instruments. We will be required to follow a fair value approach using an option-pricing model, such as the Black Scholes option valuation model, at the date of a stock option grant. The deferred compensation calculated under the fair value method would then be amortized over the respective vesting period of the stock option. The adoption of share based compensation has no material impact on our results of operations.





Recently Issued Accounting Pronouncements




Management reviewed accounting pronouncements issued during the three months ended December 31, 2010, and no pronouncements were adopted during the period.





3.
CAPITAL STOCK





During the year ended December 31, 2010, the Company issued 6,666,666 shares of common stock at purchase prices between $0.06 and $0.08 per share for cash in the amount of $450,000. Also 800,000 shares of common stock were issued at a price of $0.11 per share for services with a fair value of $88,000. During the year ended December 31, 2009, the Company issued 14,400,000 shares of common stock at a purchase price of $0.05 per share for cash in the amount of $720,000, through a private placement made pursuant to Rule 506 of Regulation D promulgated under section 4(2) of the Securities Act of 1933, as amended.





4.
STOCK OPTIONS AND WARRANTS




Warrants


During the year ended December 31, 2010, the Company issued 8,333,332 warrants to investors with an exercise option to purchase shares of common stock over a five year period.  No warrants were issued for the year ended December 31, 2009.




5.
RENTAL LEASE





The Company renewed its month-to-month lease for a one year term expiring on May 14, 2011, with an option to renew for another 12 months. The rent paid for the years ended December 31, 2010 and 2009 was $6,408 for both years.




F-8




BIOSOLAR, INC.


(A Development Stage Company)


NOTES TO FINANCIAL STATEMENTS


DECEMBER 31, 2010 AND 2009





6.
INTANGIBLE ASSETS





Intangible assets that have finite useful lives continue to be amortized over their useful lives, and are reviewed for impairment when warranted by economic condition.





UsefulLives

2010


2009Patents-gross



$
121,919


$
86,374Less accumulated amortization

20 years


40



40$
121,879


$
86,334





As of December 31, 2010 and 2009, no amortization has been expensed for the patents, since approval of the patents is pending.





7.
INCOME TAXES





The Company files income tax returns in the U.S. Federal jurisdiction, and the state of California. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2008.





Deferred income taxes have been provided by temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. To the extent allowed by GAAP, we provide valuation allowances against the deferred tax assets for amounts when the realization is uncertain. Included in the balances at December 31, 2010 and 2009, are no tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility.  Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier
period.





The Company's policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the periods ended December 31, 2010 and 2009, the Company did not recognize interest and penalties.





8.
DEFERRED TAX BENEFIT





At December 31, 2010, the Company had net operating loss carry-forwards of approximately $2,700,000, which expire at dates that have not been determined. No tax benefit has been reported in the December 31, 2010 and 2009 financial statements, since the potential tax benefit is offset by a valuation allowance of the same amount.





The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the years ended December 31, 2010 and 2009 due to the following:




F-9




BIOSOLAR, INC.


(A Development Stage Company)


NOTES TO FINANCIAL STATEMENTS


DECEMBER 31, 2010 AND 2009





8.
DEFERRED TAX BENEFIT (Continued)




2010


2009Book income

$
(367,437
)

$
(257,520
)State income taxes


(320
)


(320
)Depreciation


(5,387
)


(1,760
)M & E


395



418R&D


6,018



1,606Penalties


72



-Valuation Allowance


366,659



257,576Income tax expense

$
-


$
-





Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the difference between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.





Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the difference between the reported amounts of assets and liabilities and their tax bases.





Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.





Net deferred tax liabilities consist of the following components as of December 31, 2010 and 2009:





2010


2009Deferred tax assets:NOL carryover

$
1,458,662


$
1,086,827R & D credit


39,537



24,502Deferred tax liabilites:Depreciation


(12,998
)


(7,627
)Less Valuation Allowance


(1,485,201
)


(1,103,702
)Net deferred tax asset

$
-


$
-





Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry-forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry-forwards may be limited as to use in future years.




F-10




BIOSOLAR, INC.


(A Development Stage Company)


NOTES TO FINANCIAL STATEMENTS


DECEMBER 31, 2010 AND 2009





8.
SUBSEQUENT EVENTS





Management has evaluated subsequent events according to the requirements of ASC TOPIC 855, and has reported the following:





As of February 22, 2010, the Company entered into a ninety (90) day agreement for services to promote the Company’s product.





As of February 23, 2010, the Company issued 2,000,000 shares of common stock at a price of $0.075 per share for cash of $150,000. The shares were issued with 2,666,668 warrants attached to purchase shares of common stock over a five year period at a price of $0.0375 per share.





As of March 8, 2011, the Company issued 1,400,000 shares of common stock at a price of $0.075 per share for cash of $105,000.
  F-11