After we pointed out Bloomberg's failure to mention that an analyst quoted in a piece had been paid by the firm he expressed bullishness on, Bloomberg corrected the piece, adding that "Beacon said in a statement distributed Jan. 10 by PR Newswire that it was compensated $15,000 and 100,000 restricted shares by a third party for enrollment of BioSolar in a research program, without giving more specific information. Earlier today, BloggingStocks.com reported the payment."

But here's where it gets confusing. In the January 9th press release, Beacon disclosed that:

"Beacon Equity Research has been compensated a total of fifteen thousand dollars and one hundred thousand restricted rule 144 shares from a non-controlling third party for enrollment of BSRC in this research program." (emphasis added)

But in a press release dated January 3rd, Beacon disclosed that:

"Beacon Equity Research and its affiliates have been directly compensated a total of fifteen thousand dollars and one hundred thousand restricted rule 144 shs directly from the company for enrollment of BSRC in this research program and other marketing services." (emphasis added)

Update: Bloomberg was alerted that the analyst was paid to deliver this report, and has added the details of the payment in its news service item.

While Michael Bloomberg is busy mulling a possible Presidential bid, he may want to devote a few minutes to monitoring the garbage coming out of his company's newsroom.

Bloomberg's Kelly Riddell reported on BioSolar, a tiny bulletin board stock that "expects its first product to generate about $100 million in sales in 2010," Chief Executive Officer David Lee said.

Nine figure revenue projections are pretty ambitious for a company that has reported literally no revenue since its inception and has spent precious little on research and development. In its most recent quarter, the company reported R&D expenditures of just over $50,000 and marketing expenses of more than $29,000-- an impressive sum for a company that has never sold anything.

What exactly is the marketing money being spent on? Back to the Bloomberg piece:

The company may earn $6.3 million this year on initial sales of its backsheets, Victor Sula, an analyst at Beacon Equity Research in Frisco, Texas, said.

In a recent post on his personal blog, trader Timothy Sykes told investors to "respect the hype" in six particular penny stocks. This perspective runs in-line with Tim's philosophy that investing in penny stocks is a probability game technical analysis is the best way to play. Although I'm sure money can be made by playing the greater fool theory, after looking at some of Tim's picks, I have concluded that the risks surrounding one of them -- BioSolar (OTC BB: BSRC) -- are enormous.

BioSolar is currently being "pumped" by Beacon Research according to Sykes, and we should all "respect the pump," he argues. While I understand short-term traders try to profit from quick share price moves in these sort of companies, this situation seems way too risky for the average trader or investor.

My main concerns: 1) Beacon Equity's report makes several outlandish assumptions, 2) the company's CEO appears to have ties to other penny stocks (he did not deny those claims via my recent email exchange with him), and 3) I'm highly skeptical of BioSolar's ability to create new technologies for a variety of reasons.

The purpose of this piece is to raise important issues any potential investor should see before investing in BioSolar. I have no position (long or short) in this company, I am not accusing BioSolar or its executives of perpetrating a fraud, and I am not personally aware of any short sellers involved in this stock.