Bluestar Health (BLSH) 10QSB 2005 Q2 Quarterly report (small business)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-QSB

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

For the quarterly period ended March 31, 2005

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

For the transition period from _______________ to _______________.

Commission file number: 000-08835

Bluestar Health, Inc.

(Exact name of registrant as specified in its charter)

Colorado (State or other jurisdiction of incorporation or organization)	84-0736215 (I.R.S. Employer Identification No.)
19901 Southwest Freeway, Suite 209 Sugar Land, TX (Address of principal executive offices)	77479 (Zip Code)

Registrant’s telephone number, including area code (281) 207-5485

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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.   Yesx No o

Applicable only to issuers involved in bankruptcy proceedings during the preceding five years

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.   YesoNoo

Applicable only to corporate issuers

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date. As of May 24, 2005, there were13,345,094 shares of common stock, par value $0.001, issued and outstanding.

Transitional Small Business Disclosure Format

(check one):

Yeso Noo

Bluestar Health, Inc.

TABLE OF CONTENTS

PART I
ITEM 1	Financial Statements	3
ITEM 2	Managements Discussion and Analysis or Plan of Operation	9
ITEM 3	Controls and Procedures	14
PART II
ITEM 1	Legal Proceedings	15
ITEM 2	Changes in Securities and Use of Proceeds	15
ITEM 3	Defaults Upon Senior Securities	15
ITEM 4	Submission of Matters to a Vote of Security Holders	15
ITEM 5	Other Information	15
ITEM 6	Exhibits and Reports on Form 8-K	16

2

PART I

This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company set forth under the heading “Management’s Discussion and Analysis of Financial Condition or Plan of Operation.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.

Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. The Company’s future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.

ITEM 1 Financial Statements

3

BLUESTAR HEALTH, INC.

CONSOLIDATED BALANCE SHEET

March 31, 2005

ASSETS
CURRENT ASSETS:
Cash	$	117,589
Accounts receivable, net of allowance of $0		27,253
Total current assets		144,842
PROPERTY AND EQUIPMENT, net		35,056
GOODWILL		137,000
Total assets	$	316,898
LIABILITIES AND SHAREHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Current maturities of long term debt	$	22,964
Short term bank line of credit		49,157
Accounts payable		42,812
Accrued expenses		35,935
Advance from shareholder		156,004
Total current liabilities		306,872
LONG TERM DEBT		63,308
TOTAL LIABILITIES		370,180
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ DEFICIT
Common stock, $.001 par value, 40,000,000 shares authorized,13,250,094 shares issued and outstanding		13,250
Additional paid in capital		1,486,380
Accumulated deficit		(1,552,912	)
Total shareholders’ deficit		(53,282	)
Total liabilities and shareholders’ deficit	$	316,898

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

4

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Six Months Ended

March 31, 2005 and March 31, 2004

	Three Months Ending March 31,						Six Months Ending March 31,
	2005			2004 (RESTATED)			2005			2004 (RESTATED)
REVENUES	$	142,580		$	-		$	341,234		$	-
OPERATING EXPENSES:
GENERAL & ADMINISTRATIVE		234,704			133,043			448,206			281,461
NON CASH STOCK FOR SERVICES		22,074			-			445,612			-
DEPRECIATION		2,064			-			4,129			-
TOTAL OPERATIONS EXPENSES		258,842			133,043			897,947			281,461
OPERATING LOSS		(116,262	)		(133,043	)		(556,713	)		(281,461	)
INTEREST EXPENSE		(2,880	)		(3,202	)		(5,358	)		(6,352	)
NET LOSS	$	(119,142	)	$	(136,245	)	$	(562,071	)	$	(287,813	)
NET INCOME PER SHARE:
Basic and diluted	$	(0.01	)	$	(0.01	)	$	(0.04	)	$	(0.03	)
Weighted average shares outstanding:
Basic and diluted		13,105,931			10,947,301			13,026,339			10,947,301

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

March 31, 2005 and 2004

	2005			2004
				(RESTATED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(562,071	)	$	(287,813	)
Adjustments to reconcile net loss to cash used in operating activities:
Stock issued for services		445,612			204,600
Depreciation		4,129			-
Changes in current assets and liabilities:
Accounts receivable		55,933			-
Accounts payable and accrued expenses		(26,279	)		16,610
Net cash used in (provided by) operating activities		(82,676	)		(66,603	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments from shareholder		(29,386	)		67,596
Proceeds from sale of stock		23,300
Funds from short term bank line of credit		49,157
Payments on notes payable		1,205			-
Net cash used in (provided by) financing activities		44,276			67,596
NET CHANGE IN CASH		(38,400	)		993
CASH, beginning of year		155,989			-
CASH, end of year	$	117,589		$	993
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	$	1,296		$	-
Taxes paid	$	-		$	-

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

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Bluestar Health, Inc.

NOTES TO FINANCIAL STATEMENTS

March 31, 2005

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Bluestar Health, Inc. (“Bluestar”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Form 10-K filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements in the Form 10-K have been omitted.

Vehicles

Vehicles are stated at cost. Depreciation is computed using the straight-line method over the estimated economic lives of the assets that range between three and seven years.

Stock Options

The Company accounts for its stock-based compensation plans under Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees. Statement of Financial Accounting Standard ("FAS") No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, issued in December 2002 requires pro forma net income (loss) and pro forma net income (loss) per share to be disclosed in interim financial statements. For the period ended June 30, 2003, Blue Star’s pro form net loss and net loss per share are equal to the net loss and net loss per share reported herein.

NOTE 2 - COMMON STOCK

In September 2004, Bluestar adopted a Non Qualified Stock Grant and Option plan (the “2004 Plan”) for employees, officers, directors and consultants which authorized the issuance of 1,200,000 shares of common stock. The 2004 Plan is administered by the Board of Directors. The Board of Directors has the exclusive power to select the participants in the 2004 Plan, to establish the terms of the options granted to each participant, and to make all determinations necessary or advisable.

During the quarter ended March 31, 2005, Bluestar issued 90,690 shares of common stock under this plan for both staff costs and consulting services at a value of $22,073.

NOTE 3 - RESTATEMENT OF PREVIOUSLY REPORTED FINANCIAL STATEMENTS

On August 24, 2004, our Board of Directors elected to rescind the acquisition of Healthquest, Inc., in its entirety. On August 27, 2004, Bluestar Physical Therapy, a Division of Bluestar Health Inc., filed suit seeking rescission of the transaction by which Bluestar Physical Therapy acquired HealthQuest Inc.  The suit alleges fraudulent inducement and first material breach of the contract by HealthQuest and Dr. Peter Lord, the President and Chief Executive Officer of HealthQuest, which rendered the continued performance under the agreement impossible. 

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Due to the rescission, the prior year’s numbers have been restated to remove the effects of the Healthquest activity in both the three and six months ended March 31, 2004. A summary of the restatement for the March 31, 2004 financials is disclosed below:

	Previously Stated			Increase Decrease			Restatement
As of March 31, 2004
Consolidated Balance Sheet:
Cash	$	2,416		$	(1,423	)	$	993
Vehicles, net		43,592			(43,592	)		-
Total Assets	$	46,008		$	(45,015	)	$	993
Accounts payable and accrued expenses	$	75,553			(37,162	)	$	38,391
Note payable		424,929			(344,879	)		80,050
Advances from stockholders		224,368			(60,118	)		164,250
Long term debt, net of current portion		7,158			(7,158	)		-
Common stock		11,226			(250	)		10,976
Additional paid in capital		762,069			(183,128	)		578,941
Deficit accumulated during development stage		(1,459,295	)		587,680			(871,615	)
Total liabilities and stockholders deficit	$	46,008			(45,015	)	$	993
For the six months ended March 31, 2004
Consolidated Statement of Operations
Revenues	$	29,393		$	(29,393	)	$	-
Operating expenses:
General and administrative		404,822			(123,361	)		281,461
Impairment		482,981			(482,981	)		-
Interest expense		17,083			(10,731	)		6,352
Total operating expenses		904,886			(617,073	)		287,813
Net loss	$	(875,493	)	$	587,680		$	(287,813	)
Net loss per share: Basic and diluted		($0.08	)					($0.03	)
Weighted average shares outstanding: Basic and diluted		11,197,301						10,947,301
For the three months ended March 31, 2004
Consolidated Statement of Operations
Revenues	$	11,604		$	(11,604	)	$	-
Operating expenses:
General and administrative		210,778			(77,735	)		133,043
Impairment		11,250			(11,250	)		-
Interest expense		13,495			(10,293	)		3,202
Total operating expenses		235,523			(99,278	)		136,245
Net loss	$	(223,919	)				$	(136,245	)
Net loss per share: Basic and diluted		($0.02	)					($0.01	)
Weighted average shares outstanding: Basic and diluted		11,197,301						10,947,301

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ITEM 2 Managements Discussion and Analysis or Plan of Operation

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors. The following discussion should be read together with our financial statements and the notes to those financial statements included elsewhere in this annual report.

Except for historical information, the materials contained in this Management’s Discussion and Analysis are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) and involve a number of risks and uncertainties. These include the Company’s historical losses, the need to manage its growth, general economic downturns, intense competition in the emissions testing industry, seasonality of quarterly results, and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission. Although forward-looking statements in this Quarterly Report reflect the good faith judgment of management, such statements can only be based on facts and factors currently known by the Company. Consequently, forward-looking statements are inherently subject to risks and uncertainties, actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Readers are urged to carefully review and consider the various disclosures made by the Company in this Quarterly Report, as an attempt to advise interested parties of the risks and factors that may affect the Company’s business, financial condition, and results of operations and prospects.

Overview

We own and operate licensed outpatient physical therapy clinics. We currently operate two clinics which we acquired during the quarter ended June 30, 2004. We intend to do additional acquisitions and hope to expand nationwide.

The clinics we acquire are intended to provide post-operative care and treatment for a variety of orthopedic related disorders and sports-related injuries only on an outpatient basis. Our growth strategy is to acquire and develop outpatient physical therapy clinics initially in Texas and the South and later to expand on a national basis.

Three Months Ended March 31, 2005 Compared to the Three Months Ended March 31, 2004

Results of Operations

Introduction

As a result of our acquisition of the two outpatient and physical therapy clinics, our financial information for the three months ended March 31, 2005 differs significantly from our financial information for the same period one year earlier. For example, our revenues for the quarter ended March 31, 2005, were $142,580, compared to $0 for the quarter ended March 31, 2004. However, although our revenues rose significantly compared to last year, we are not operating profitably, and do not anticipate doing so in the near future, since these increased revenues are accompanied by a corresponding increase in our operating costs. The comparison of these two periods is detailed below. Since we now have operations, where we did not one year ago, we have also included our previous quarter (December 31, 2004) numbers for comparison.

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Revenues and Net Loss

Our revenues, general and administrative expenses, interest expense, and net loss for the quarter ended March 31, 2005, as compared to the quarters ended March 31, 2004 and December 31, 2004, are as follows:

	Quarter ended March 31, 2005			Quarter ended March 31, 2004			Quarter ended December 31, 2004
Revenues	$	142,580		$	-		$	198,654
General and administrative		234,704			133,043			213,502
Non cash stock for services		22,074			-			423,538
Depreciation		2,064			-			2,065
Interest expense		(2,880	)		(3,202	)		(2,478	)
Net loss		(119,142	)		(151,568	)		(442,929	)

Revenues

Our revenues were significantly higher this year ($142,580 for the quarter ended March 31, 2005) when compared to last year ($0 for the quarter ended March 31, 2004) due to our acquisition and operation of the two clinics. Since the three months ended March 31, 2005 was only our third quarter operating the clinics our revenues of $142,580 for this quarter may not be indicative of the revenues from those two clinics in future quarters. During our first two quarters operating the clinics, the three months ended December 31, 2004 and September 30, 2004, our revenues were $198,654 and $302,349, respectively. These quarter-to-quarter changes in revenues illustrates how our revenues from the two clinics may change dramatically quarter-to-quarter. Additionally, we plan on locating additional clinics to acquire in the future, which may also change our revenues in future quarter and year periods.

General and Administrative Expenses

Our general and administrative expenses were $234,704 for the quarter ended March 31, 2005, compared to $133,043 during the same period one year ago. This 75% increase in general and administrative expenses this year is due to the expenses involved in operating the clinics. The variance in our general and administrative expenses of $234,704 and $213,502 for the quarters ended March 31, 2005 and December 31, 2004, respectively, shows how our general and administrative expenses may vary from quarter to quarter.

Non Cash Stock Issued for Services

For the quarter ended March 31, 2005, we issued stock valued at $22,074 for services, compared to $0 for the quarter ended March 31, 2004. These stock issuances were primarily made to consultants.

Interest Expense

Our interest expense of ($2,880) for the quarter ended March 31, 2005 is related to a note payable that dates back to the transaction between us and Alfred Oglesby, our sole officer and director, whereby Mr. Oglesby transferred his stock ownership in Bluestar Physical Therapy, Inc, a Texas corporation for 94.5% of our outstanding stock. Currently this note payable has repayment terms of 60 monthly payments of $1,500 beginning in October, 2004.

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Net Loss

Our net loss for the three months ended March 31, 2005 was ($119,142), compared to ($136,245) for the three months ended March 31, 2004. This significant decrease in our net loss from year to year is attributable to the revenues derived from operating the two clinics. One year ago we did not have any revenues, so although our operating expenses were higher for the quarter ended March 31, 2005 compared to March 31, 2004, this increase was offset by the addition of revenue from the two clinics. For the three months ended December 31, 2004, we had a net loss of ($442,929). This significant decrease in our net loss for the quarter ended December 31, 2004 compared to March 31, 2005, is due to the fact we issued significantly more stock for services for the quarter ended December 31, 2004.

Six Months Ended March 31, 2005 Compared to the Six Months Ended March 31, 2004

Results of Operations

Introduction

As a result of our acquisition of the two outpatient and physical therapy clinics, our financial information for the six months ended March 31, 2005 also differs significantly from our financial information for the same period one year earlier. For example, our revenues for the six months ended March 31, 2005, were $341,234, compared to $0 for the six months ended March 31, 2004. The comparison of these two periods is detailed below.

Revenues and Net Loss

Our revenues, general and administrative expenses, interest expense, and net loss for the six months ended March 31, 2005, as compared to the six months ended March 31, 2004, are as follows:

	Six Months ended March 31, 2005			Six Months ended March 31, 2004
Revenues	$	341,234		$	-
General and administrative		448,206			281,461
Non cash stock for services		445,612			-
Depreciation		4,129			-
Interest expense		(5,358	)		(6,352	)
Net loss		(562,071	)		(287,813	)

Revenues

As noted above, our revenues were significantly higher this six month period ($341,234 for the six months ended March 31, 2005) when compared to the same six month period one year ago ($0 for the six months ended March 31, 2004) due to our acquisition and operation of the two clinics. Since we just began operating the clinics in June 2004, the revenues for the six months ended March 31, 2005 may not be indicative of the revenues from those two clinics in future six month periods.

General and Administrative Expenses

Our general and administrative expenses were $448,206 for the six months ended March 31, 2005, compared to $281,461 during the same period one year ago. This 60% increase in general and administrative expenses this year is due to the expenses involved in operating the clinics.

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Non Cash Stock Issued for Services

For the six months ended March 31, 2005, we issued stock valued at $445,612 for services, compared to $0 for the six months ended March 31, 2004.

Interest Expense

Our interest expense of ($5,358) for the six months ended March 31, 2005 is related to a note payable that dates back to the transaction between us and Alfred Oglesby whereby Mr. Oglesby transferred his stock ownership in Bluestar Physical Therapy, Inc, a Texas corporation for 94.5% of our outstanding stock. Currently this note payable has repayment terms of 60 monthly payments of $1,500 beginning in October, 2004.

Net Loss

Our net loss for the six months ended March 31, 2005 was ($562,071), compared to ($287,813) for the six months ended March 31, 2004. This significant increase in our net loss from year to year is attributable to both the increase in our general and administrative expenses and the stock issued for services for this six month period.

Liquidity and Capital Resources

Introduction

We have not operated profitably, and do not anticipate doing so in the near future. We are seeking to raise capital through a variety of sources to fund operations until such time as we might operate on a positive cash flow basis. To date, we have relied primarily on funds from our majority stockholder, and anticipate continuing to do so until we raise the necessary capital.

Our cash, total current assets, total assets, total current liabilities, and total liabilities as of March 31, 2005 and December 31, 2004 are as follows:

	March 31, 2005		December 31, 2004		Change
Cash	$	117,589	$	148,899	$	(31,310	)
Total current assets		144,842		184,052		(39,210	)
Total assets		316,898		358,172		(41,274	)
Total current liabilities		306,872		268,954		37,918
Total liabilities		370,180		337,686		32,494

Cash Requirements

Currently, our cash requirements consist primarily of general and administrative expenses related to operating the two clinics, maintaining our status as a public company, and certain debt payments that come due.

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Sources and Uses of Cash

Operations

Our net cash used in (provided by) operating activities totaled ($82,676) for the six months ended March 31, 2005. We generated revenues totaling $341,234 for the six months ended March 31, 2005, mainly from the operation of our two clinics. We anticipate we will continue to generate revenues from these two clinics in future quarters, but we do not anticipate we will not be operating at a positive cash flow in the near future.

Financing

For the six months ended March 31, 2005 our net cash from financing activities totaled $44,276, consisting of $49,157 from a short term bank line of credit, $23,300 from the sale of our common stock, $1,205 from payments on notes payable, and advances from a shareholder totaling ($29,386). Prior to beginning to operate the two clinics we funded expenses primarily through advances from our majority shareholder. Until we can raise additional capital and/or increase the revenues from the clinics to get cash flow positive, we anticipate we will continue to take advances from our majority shareholder to help fund our operations. We do not currently have any specific plans as to how we will raise the necessary capital or increase the revenues from the clinics.

Debt Instruments, Guarantees, and Related Covenants

We have two primary debt obligations. The first is a vehicle loan, which is current. The second obligation is a note to the controlling shareholder of Taurus Entertainment Companies, Inc. arising out of the transaction whereby our current majority shareholder obtained control. Under new revised terms for this note, its new repayment terms are $1,500 per month for the next 60 months, beginning in October, 2004.

Critical Accounting Policies

The discussion and analysis of the Company’s financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.

Revenue Recognition

Our revenue recognition policy is objective in that we recognize revenue when services are performed. Accordingly, there are no estimates or assumptions that have caused deviation from our revenue recognition policy.

Accounting for Stock-Based Compensation

We account for stock-based compensation based on the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” as amended by the Financial Accounting Standards Board Interpretation No. 44, “Accounting for Certain Transactions Involving Stock Compensation.” These rules state that no compensation expense is recorded for stock options or other stock-based awards to employees that are granted with an exercise price equal to or above the estimated fair value per share of the company’s common stock on the grant date. We adopted the disclosure requirements of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” which requires compensation expense to be disclosed based on the fair value of the options granted at the date of the grant.

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In December 2002, the Financial Accounting Standards Board issued Statement No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure—an amendment of Financial Accounting Standards Board Statement No. 123.” This statement amends Statement of Financial Accounting Standards No. 123, to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure provisions of Statement of Financial Accounting Standards No. 123 to require prominent disclosure about the effects on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation. We did not voluntarily change to the fair value based method of accounting for stock-based employee compensation, therefore, the adoption of Statement of Financial Accounting Standards No. 148 did not have a material impact on our financial position.

ITEM 3 Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer (or those persons performing similar functions), after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended) as of a date within 90 days of the filing of this quarterly report (the “Evaluation Date”), have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to ensure the timely collection, evaluation and disclosure of information relating to the Company that would potentially be subject to disclosure under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect the internal controls subsequent to the Evaluation Date.

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PART II

ITEM 1 Legal Proceedings

In November 2003, a lawsuit was filed by R. Dean Ayers against our subsidiary, Bluestar Physical Therapy, Inc., alleging breach of contract in the amount of $16,773.66. On January 27, 2005, we settled this dispute with Mr. Ayers for $10,000 cash, 20,690 shares of our common stock, and the mutual execution of general releases.

On August 27, 2004, Bluestar Physical Therapy, a Division of Bluestar Health Inc., filed suit seeking rescission of the transaction by which Bluestar Physical Therapy acquired HealthQuest, Inc.  The suit alleges fraudulent inducement and first material breach of the contract by HealthQuest and Dr. Peter Lord, the President and Chief Executive Officer of HealthQuest, which rendered the continued performance under the agreement impossible.  The suit is Cause No. 2004-47308;Bluestar Physical Therapy, a Division of Bluestar Health Inc. v. HealthQuest, Inc. and Peter Lord; filed in the 152^nd Judicial District Court of Harris County, Texas.  HealthQuest answered with a general denial and discovery in the case is ongoing.

In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.

ITEM 2 Changes in Securities and Use of Proceeds

On January 24, 2005, we issued 20,000 shares of our common stock, restricted in accordance with Rule 144, to an employee as compensation. The issuance was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, and the investor was a sophisticated investor who is familiar with our business operations.

ITEM 3 Defaults Upon Senior Securities

There have been no events that are required to be reported under this Item.

ITEM 4 Submission of Matters to a Vote of Security Holders

There have been no events that are required to be reported under this Item.

ITEM 5 Other Information

Mr. Oglesby’s Stock Ownership

Mr. Oglesby’s stock ownership was listed in our Annual Report on Form 10-KSB for the year ended December 31, 2004, as 9,550,000 shares of our common stock. This amount was incorrect as we inadvertently omitted an additional 96,000 shares Mr. Oglesby owns in a brokerage account. Mr. Oglesby’s total stock ownership of our common stock is 9,646,000 shares.

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ITEM 6 Exhibits and Reports on Form 8-K

(a) Exhibits

3.1 (1)	Restated Articles of Incorporation of Taurus Petroleum, Inc.
3.2 (2)	Articles of Amendment to the Articles of Incorporation of Taurus Petroleum, Inc.
3.3 (1)	Bylaws of Taurus Oil Corporation
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1	Chief Executive Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Chief Financial Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1) Incorporated by reference from our Annual Report on Form 10-KSB for the year ended September 30, 1998, filed with the Commission on January 20, 1999.

(2) Incorporated by reference from our Quarterly Report on Form 10-QSB for the quarter ended June 30, 2004, filed with the Commission on August 25, 2004.

(b) Reports on Form 8-K

We did not file any Current Reports on Form 8-K during the quarter ended March 31, 2005.

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SIGNATURES

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

Dated: May 27, 2005	Bluestar Health, Inc.
	/s/ Alfred Oglesby
	By:Alfred Oglesby, President and Chief Financial Officer

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