YOUCHANGE, INC.
(A DEVELOPMENT STAGE COMPANY)
Unaudited Financial Statements
For the Three and Six Months Ended December 31, 2009 and 2008, and the
Period from August 22, 2008 (Inception) to December 31, 2009
YOUCHANGE, INC.
(A DEVELOPMENT STAGE COMPANY)
Unaudited Financial Statements
For the Three and Six Months Ended December 31, 2009 and 2008, and the
Period from August 22, 2008 (Inception) to December 31, 2009
TABLE OF CONTENTS
| | Page(s) |
| Balance Sheets as of December 31 (unaudited) and June 30, 2009 | F-1 |
| | |
| Statement of Operations (unaudited) for the three and six months ended December 31, 2009 and 2008 and the period from August 22, 2008 (inception) to December 31, 2009 | F-2 |
| | |
| Statement of Cash Flows (unaudited) for the six months ended December 31, 2009 and 2008 and the period from August 22, 2008 (inception) to December 31, 2009 | F-3 |
| | |
| Notes to Unaudited Financial Statements | F-4-7 |
| YOUCHANGE, INC. | |
| (A Development Stage Company) | |
| Balance Sheets | |
| | | | | | | |
| | December 31, 2009 | | June 30, 2009 | |
| |
| |
| | (unaudited) | | | | |
| ASSETS | |
| | | | | | | |
| Current assets | | | | | | |
| Cash and cash equivalents | | $ | 43,669 | | | $ | 21,889 | |
| Shareholder receivable | | | - | | | | 1,000 | |
| Interest receivable | | | 1,394 | | | | - | |
| Note receivable - related party | | | 50,000 | | | | - | |
| Total current assets | | | 95,063 | | | | 22,889 | |
| | | | | | | | | |
| Other assets - related party | | | 50,000 | | | | - | |
| | | | | | | | | |
| Total assets | | $ | 145,063 | | | $ | 22,889 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |
| | | | | | | | | |
| Current liabilities | | | | | | | | |
| Accrued expense payable | | | 12,500 | | | | - | |
| Related party payables | | | 87,299 | | | | 88,992 | |
| Interest payable | | | 3,193 | | | | - | |
| Notes payable | | | 225,000 | | | | - | |
| Total current liabilities | | | 327,992 | | | | 88,992 | |
| | | | | | | | | |
| Stockholders' Equity (Deficit) | | | | | | | | |
| Common stock, no par value; 10,000,000 shares authorized, 4,960,000 and 1,000,000 shares issued and outstanding at December 31 and June 30, 2009, respectively | | | 4,960 | | | | 1,000 | |
| Deficit accumulated during the development stage | | | (187,889 | ) | | | (67,103 | ) |
| Total stockholders' equity (deficit) | | | (182,929 | ) | | | (66,103 | ) |
| | | | | | | | | |
| Total liabilities and stockholders' equity (deficit) | | $ | 145,063 | | | $ | 22,889 | |
| | | | | | | | | |
| See accompanying notes to financial statements | |
| YOUCHANGE, INC. | |
| (A Development Stage Company) | |
| Statement of Operations (unaudited) | |
| | |
| | | | | | | | | | | | | | | For the period from August 22, 2008 (inception) to December 31, 2009 | |
| | | | | | | | | | | | | |
| | | Three months ended December 31, | | | Six months ended December 31, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| | | | | | | | | | | | | | | | |
| Revenue | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | | | | | | | | | |
| Expenses | | | | | | | | | | | | | | | | | | | | |
| Professional fees | | | 67,087 | | | | - | | | | 89,362 | | | | - | | | | 133,962 | |
| Commission expense | | | 22,500 | | | | - | | | | 22,500 | | | | - | | | | 22,500 | |
| Rent expense | | | - | | | | 7,000 | | | | - | | | | 7,000 | | | | 10,550 | |
| Other general and administrative | | | 6,965 | | | | 2,066 | | | | 7,125 | | | | 2,066 | | | | 21,128 | |
| Total expenses | | | 96,552 | | | | 9,066 | | | | 118,987 | | | | 9,066 | | | | 188,140 | |
| Net operating loss | | | (96,552 | ) | | | (9,066 | ) | | | (118,987 | ) | | | (9,066 | ) | | | (188,140 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Interest income | | | 1,394 | | | | 50 | | | | 1,394 | | | | 50 | | | | 3,444 | |
| Interest expense | | | (3,193 | ) | | | - | | | | (3,193 | ) | | | - | | | | (3,193 | ) |
| Net loss | | $ | (98,351 | ) | | $ | (9,016 | ) | | $ | (120,786 | ) | | $ | (9,016 | ) | | $ | (187,889 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Basic and diluted loss per common share | | $ | (0.02 | ) | | $ | (0.01 | ) | | $ | (0.03 | ) | | $ | (0.01 | ) | | $ | (0.10 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Weighted average shares outstanding | | | 4,794,152 | | | | 1,000,000 | | | | 3,590,215 | | | | 1,000,000 | | | | 1,974,640 | |
| | | | | | | | | | | | | | | | | | | | | |
| See accompanying notes to financial statements | |
| YOUCHANGE, INC. | |
| (A Development Stage Company) | |
| Statements of Cash Flows (unaudited) | |
| | |
| | | | | | | | For the period from August 22, 2008 (inception) to December 31, 2009 | |
| | | | | | | |
| | Six months ended December 31, | |
| |
| | 2009 | | 2008 | |
| Cash flows from operating activities | | | | | | | | | |
| Net loss | | $ | (120,786 | ) | | $ | (9,016 | ) | | $ | (187,889 | ) |
| Changes in operating assets and liabilities | | | | | | | | | | | | |
| Accrued interest income | | | (1,394 | ) | | | | | | | (1,394 | ) |
| Prepaid expenses | | | (50,000 | ) | | | | | | | (50,000 | ) |
| Accrued expenses | | | 12,500 | | | | | | | | 12,500 | |
| Accrued interest expense | | | 3,193 | | | | | | | | 3,193 | |
| Advances payable | | | - | | | | 9,380 | | | | - | |
| Net cash used in operating activities | | | (156,487 | ) | | | 364 | | | | (223,590 | ) |
| | | | | | | | | | | | | |
| Cash flows from investing activities | | | | | | | | | | | | |
| Note receivable | | | (50,000 | ) | | | - | | | | (50,000 | ) |
| Net cash used in investing activities | | | (50,000 | ) | | | - | | | | (50,000 | ) |
| | | | | | | | | | | | | |
| Cash flows from financing activities | | | | | | | | | | | | |
| Proceeds from payment of related party payables | | | (1,693 | ) | | | - | | | | 87,299 | |
| Proceeds from issuance of debt | | | 225,000 | | | | | | | | 225,000 | |
| Proceeds from sale of stock | | | 4,960 | | | | - | | | | 4,960 | |
| Net cash provided by financing activities | | | 228,267 | | | | - | | | | 317,259 | |
| | | | | | | | | | | | | |
| Net change in cash | | | 21,780 | | | | 364 | | | | 43,669 | |
| | | | | | | | | | | | | |
| Cash at beginning of period | | | 21,889 | | | | - | | | | - | |
| | | | | | | | | | | | | |
| Cash at end of period | | $ | 43,669 | | | | 364 | | | $ | 43,669 | |
| | | | | | | | | | | | | |
| Supplemental disclosure of non-cash investing and financing activities: | |
| | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | |
| Supplemental Cash Flow Information: | | | | | | | | | | | | |
| Cash paid for interest | | $ | - | | | $ | - | | | $ | - | |
| Cash paid for income taxes | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | |
| See accompanying notes to financial statements | |
YOUCHANGE, INC.
(A Development Stage Company)
Notes to the Unaudited Financial Statements
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows as of and for the periods ended December 31, 2009 and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's June 30, 2009 audited financial statements. The results of operations for the period ended December 31, 2009 are not necessarily indicative of the operating results for the full year ended June 30, 2010.
NOTE 2 – COMMON STOCK
The authorized common stock of the Company consists of 10,000,000 shares of common stock with no par value. The Company issued 1,000,000 shares of its common stock to its CEO and founder at $.001 per share for a total of $1,000 which was evidenced by a shareholder receivable. Further, during the period ended December 31, 2009 the Company issued 3,960,000 additional shares of its common stock for cash at $.001 per share for a total cash consideration of $4,960, including payment of the shareholder receivable for the original 1,000,000 shares issued.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plans to obtain such resources for the Company include (1) obtaining capital from significant stockholders sufficient to meet its minimal operating expenses, and (2) seeking out and completing a merger with an existing operating company. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
YOUCHANGE, INC.
(A Development Stage Company)
Notes to the Unaudited Financial Statements
NOTE 4 – RECENT ACCOUNTING PRONOUNCEMENTS
In June 2009, the FASB issued the FASB Codification. The Codification is the source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with U.S. generally accepted accounting principles. The Codification is effective for interim and annual periods ending after September 15, 2009. The Codification does not change U. S. generally accepted accounting principles and did not have a material impact on the Company’s financial statements.
The Company has determined that all other recently issued accounting standards will not have a material impact on its financial statements, or do not apply to its operations.
NOTE 5 – NET LOSS PER COMMON SHARE
Net loss per share is calculated in accordance with FASB ASC 260. There are $225,000 of convertible notes which represent, based on the mandatory conversion feature, approximately 303,500 potentially dilutive securities outstanding as of December 31, 2009.
NOTE 6 – PROVISION FOR INCOME TAXES
At December 31, 2009, the Company had incurred a net operating loss during the development stage of approximately $187,900 which is available to offset future federal and state taxable income through December 31, 2029 and 2014, respectively. The Company has established a valuation allowance equal to the full amount of the deferred tax assets approximating $75,000 due to the uncertainty of the utilization of the operating losses in future periods.
The Company has no tax positions at December 31, 2009 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the period from August 22, 2008 (inception) to December 31, 2009, the Company recognized no interest and penalties. The Company had no accruals for tax related interest and penalties at December 31, 2009.
Reconciliation of the reported amount of income tax expense to the amount of income tax expense that would result from applying domestic federal and state statutory rates:
| | | December 31, 2009 | | | Inception to date | |
| Tax at federal statutory rate (34%) | | $ | 41,000 | | | $ | 64,000 | |
| Tax at State statutory rate (5.6%) | | | 7,000 | | | | 11,000 | |
| Increase in valuation allowance | | | (48,000 | ) | | | (75,000 | ) |
| Income tax expense | | $ | - | | | $ | - | |
The tax year ended June 30, 2009 remains subject to examination.
YOUCHANGE, INC.
(A Development Stage Company)
Notes to the Unaudited Financial Statements
NOTE 7 – RELATED PARTY TRANSACTIONS
During the year ended June 30, 2009, the Company entered into an agreement with Bluestar Financial Group, Inc. (“BSFG”). The payable is unsecured and noninterest bearing, and is due on demand. The payable is convertible to an equity interest in the entity at some future date at a conversion rate yet to be determined. As of December 31, 2009, the Company has not converted the payable to an equity interest.
On November 19, 2009, the Company entered into a agreement to lend $50,000 to Feature Marketing, Inc. (“FM”). The note is secured by the assets of FM and bears interest at 24% per annum. The term of the note is 6 months. The owner of FM is a shareholder of the Company. The Company also has executed a letter of intent to purchase FM for cash and stock.
During the period ended December 31, 2009, the Company entered into notes payable with 7 shareholders totaling $162,500 as part of an effort to raise $500,000 in a convertible debt offering. The notes are convertible into shares of the Company’s common stock at a rate of 1.33 shares per dollar of debt and accrued interest, bear interest at the rate of 12% per annum, and mature in six months.
During the period ended December 31, 2009, the Company entered into an agreement to purchase a fully reporting public shell named Bluestar Financial Group, Inc. (“BSFG”) for $125,000 cash and 1,456,000 shares of BSFG common stock which would be delivered at a subsequent date. A payment of $50,000 was paid in cash in December 2009. The agreement stipulated that the remaining $75,000 would be formalized in a note which was entered into on January 1, 2010 (see Note 8-Subsequent Events).
The Company paid $73,000 to two officers of the Company as professional fees.
NOTE 8 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events from the balance sheet date through May 7, 2010. During that period, the Company finished raising $500,000 in a convertible debt offering. The convertible notes bear an interest rate of 12% and mature 6 months from the date of issuance. The notes contain a mandatory conversion feature whereby in the event of a reorganization, merger, or consolidation of the Company, the notes would convert to shares of the Company’s common stock at the rate of 1.33 shares per dollar of debt plus accrued interest.
On January 1, 2010, the Company entered into a $75,000 note with an unrelated party to purchase a fully-reporting public shell company. The note bears interest at 9% which can be paid in cash or in shares of the Company’s common stock. The note matures on June 30, 2010 and calls for two payments of $37,500 with accrued interest paid with the second and final installment. The first payment, due on April 1, 2010, was paid as stipulated.
In January 2010, the Company issued 40,000 additional shares of its common stock for cash at $.001 per share for a total cash consideration of $40. In addition, the Company issued 1,500,000 shares of its common stock to its CEO and sole director in exchange for certain trademarks and other intellectual property. This transaction was valued independently at a value of $40,000 to $60,000.
YOUCHANGE, INC.
(A Development Stage Company)
Notes to the Unaudited Financial Statements
NOTE 8 – SUBSEQUENT EVENTS (Continued)
On March 15, 2010, BlueStar Financial Group, Inc. a Nevada corporation (“BSFG”) and its wholly owned subsidiary BlueStar Acquisition Corporation (“Merger Sub”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with the Company.
The Merger Agreement and the acquisition agreed to therein, was closed on March 30, 2010. At the closing, the Company merged into Merger Sub, with the Company as the surviving entity. BSFG acquired all 7,183,196 of the issued and outstanding shares of the Company’s common stock in exchange for 21,549,588 shares of BSFG Common Stock. The Company’s stockholders received 3 shares of BSFG commons stock for each share of YouChange common stock. Additionally, 1,456,000 shares of BSFG common stock were issued to the sellers of BSFG.
These figures included 2,049,588 shares of BSFG Common Stock issued to the former note holders of YouChange whereby the $500,000 principal amount of secured convertible promissory notes plus accrued interest of $13,681was converted into 683,196 shares of YouChange common stock immediately prior to the Merger.
