SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JUNE 16, 2004
BLUESTAR HEALTH, INC.
(Exact name of registrant as specified in its charter)
COLORADO 000-08835 84-0736215
(State or other (Commission (I.R.S. Employer
jurisdiction of incorporation) File Number) Identification No.)
19901 SOUTHWEST FREEWAY, SUITE 209
SUGAR LAND, TEXAS 77479
(Address of principal executive offices) (zip code)
(281) 207-5484
(Registrant's telephone number, including area code)
TAURUS ENTERTAINMENT COMPANIES, INC.
(Former name or former address, if changed since last report.)
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
On June 16, 2004, Bluestar Health, Inc. (the "Company"), through its
wholly-owned subsidiary, PT Centers, Inc., a Texas corporation, completed the
acquisition of all of the assets of two businesses known as the Mississippi
Central Clinic ("Central") and the Canton Rehabilitation Clinic ("Canton") (the
Central and Canton Assets together are the "Acquired Assets").
Central and Canton operate as two physical therapy and rehabilitation
centers in Jackson, Mississippi. The Company intends to continue operating the
centers under their existing names.
As consideration for the Acquired Assets, the Company issued 1,150,000
shares of common stock, restricted in accordance with Rule 144 of the Securities
Act of 1933, to the two sellers of the clinics (600,000 on July 14, 2004, and
550,000 shares on July 29, 2004) (collectively the "Purchase Price"). The
sellers are unrelated parties to the Company and its affiliates, and the
Purchase Price was determined by arms-length negotiations.
The Company filed a Current Report on Form 8-K dated June 16, 2004, with
the Commission on July 2, 2004, to report this transaction.
The purpose of this amended filing is to enclose the financial statements
as required.
2
A. FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Mississippi Central Clinic Unaudited Financial Statements
---------------------------------------------------------
for interim period ended June 30, 2004.
---------------------------------------
3
MISSISSIPPI CENTRAL REHABILITATION, INC.
Balance Sheet
June 30, 2004
(Unaudited)
ASSETS
------
CURRENT ASSETS:
Cash $ 96,073
Accounts receivable, net of allowance of $0 50,761
Receivable from affiliate 11,800
Prepaid expenses and other current assets 6,200
--------
Total current assets 164,834
PROPERTY AND EQUIPMENT, NET 20,338
--------
Total assets $185,172
========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 8,211
Accrued expenses 4,664
Other 2,640
--------
Total current liabilities 15,515
SHAREHOLDERS' EQUITY
Common stock, no par value, 1,000,000 shares
authorized, 66,666 issued and outstanding 2,000
Retained Earnings 167,657
--------
Total shareholders' equity 169,657
--------
Total liabilities and shareholders' equity $185,172
========
4
MISSISSIPPI CENTRAL REHABILITATION, INC.
Statements of Operations
Six months Ended June 30,
--------------------------
2004 2003
------------ ------------
(unaudited) (unaudited)
Revenues $ 364,167 $ 350,185
Operating Expenses 301,190 301,600
------------ ------------
Income Before Income Tax Expense 62,977 48,585
Income Tax Expense 12,200 9,638
------------ ------------
Net Income $ 50,777 $ 38,947
============ ============
Net income per share:
Basic and diluted $ .76 $ .58
============ ============
Weighted average shares outstanding:
Basic and diluted 66,666 66,666
============ ============
5
MISSISSIPPI CENTRAL REHABILITATION, INC.
Statements of Cash Flows
Six Months Ended June 30,
--------------------------
2004 2003
------------ ------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 50,777 $ 38,947
Changes in assets and liabilities:
Accounts receivable (18,182) (14,508)
Prepaid expenses and other current assets (12,533) (2,436)
Accounts payable and accrued expenses 5,828 873
------------ ------------
Net cash provided by operating activities 25,890 22,876
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - (514)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt - (3,066)
------------ ------------
NET CHANGE IN CASH 25,890 19,296
CASH, beginning of year 70,183 60,520
------------ ------------
CASH, end of year $ 96,073 $ 79,816
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ - $ -
============ ============
Taxes paid $ - $ -
============ ============
6
MISSISSIPPI CENTRAL REHABILITATION, INC.
Notes to unaudited Interim Financials
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Mississippi Central
Rehabilitation, Inc. 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 elsewhere in
this Form 8-K filing. 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 periods 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 for the most recent fiscal year
2003 as reported elsewhere in this filing, have been omitted.
7
Mississippi Central ClinicAudited Financial Statements as of December 31, 2003.
-------------------------------------------------------------------------------
8
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Mississippi Central Rehabilitation, Inc.
Jackson, Mississippi
We have audited the accompanying balance sheet of Mississippi Central
Rehabilitation, Inc. as of December 31, 2003, and the related statements of
operations, shareholders' equity, and cash flows for each of the two years then
ended. 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 audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes 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 Mississippi Central
Rehabilitation, Inc. as of December 31, 2003, and the results of its operations
and its cash flows for each of the two years then ended in conformity with
accounting principles generally accepted in the United States of America.
/s/ Lopez, Blevins, Bork & Associates, L.L.P.
LOPEZ, BLEVINS, BORK & ASSOCIATES, L.L.P.
Houston, Texas
September 15, 2004
9
MISSISSIPPI CENTRAL REHABILITATION, INC.
BALANCE SHEET
DECEMBER 31, 2003
ASSETS
CURRENT ASSETS:
Cash $ 70,183
Accounts receivable, net of allowance of $0 32,579
Prepaid expenses and other current assets 5,467
--------
Total current assets 108,229
PROPERTY AND EQUIPMENT, NET 20,338
--------
Total assets $128,567
========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,910
Accrued expenses 4,378
Federal income tax payable 1,399
--------
Total current liabilities 9,687
--------
SHAREHOLDERS' EQUITY
Common stock, no par value, 1,000,000 shares
authorized, 66,666 shares issued and outstanding 2,000
Retained earnings 116,880
--------
Total shareholders' equity 118,880
--------
Total liabilities and shareholders' equity $128,567
========
See accompanying summary of accounting policies and notes to financial
statements.
10
MISSISSIPPI CENTRAL REHABILITATION, INC.
STATEMENTS OF OPERATIONS
Years Ended December 31,
------------------------
2003 2002
----------- -----------
Revenues $ 625,169 $ 647,212
Operating Expenses 605,571 574,784
----------- -----------
Income Before Income Tax Expense 19,598 72,428
Income Tax Expense 3,500 14,321
----------- -----------
Net Income $ 16,098 $ 58,107
=========== ===========
Net income per share:
Basic and diluted $ .24 $ .87
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and diluted 66,666 66,666
=========== ===========
See accompanying summary of accounting policies and notes to financial
statements.
11
MISSISSIPPI CENTRAL REHABILITATION, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Two Years Ended December 31, 2003
Common Stock Retained
Shares Amount Earnings Total
Balances, December 31, 2001 66,666 $ 2,000 $ 42,675 $ 44,675
Net income - - 58,107 58,107
-------- ------- --------- --------
Balances, December 31, 2002 66,666 2,000 100,782 102,782
Net income - - 16,098 16,098
-------- ------- --------- --------
Balances, December 31, 2003 66,666 $ 2,000 $ 116,880 $118,880
======== ======= ========= ========
See accompanying summary of accounting policies and notes to financial
statements.
12
MISSISSIPPI CENTRAL REHABILITATION, INC.
STATEMENTS OF CASH FLOWS
Years Ended December
--------------------
31,
---
2003 2002
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,098 $ 58,107
Adjustments to reconcile net income (loss) to cash
provided from (used in) operating activities:
Depreciation 7,823 9,107
Changes in assets and liabilities:
Accounts receivable 10,747 660
Prepaid expenses and other current assets (3,970) (3,264)
Accounts payable 3,138 (8,627)
Income taxes payable (5,567) (4,686)
Accrued expenses (10,302) (18,900)
--------- ---------
Net cash provided by operating activities 17,967 32,397
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (4,544) (1,284)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (3,760) (12,429)
--------- ---------
Net Change in Cash 9,663 18,684
CASH, beginning of year 60,520 41,836
--------- ---------
CASH, end of year $ 70,183 $ 60,520
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ - $ -
========= =========
Taxes paid $ 6,778 $ 8,508
========= =========
See accompanying summary of accounting policies and notes to financial
statements.
13
MISSISSIPPI CENTRAL REHABILITATION, INC.
Note 1 - Nature of Operations and Summary of Significant Accounting Policies
Mississippi Central Rehabilitation, Inc. (the Company) was incorporated in
November 1999 under the laws of the state of Mississippi. The Company was
created to provide rehabilitation services to persons suffering from physical
stress due to injury or age. The Company operates from one office located in
Jackson, Mississippi. The Company services the general public and business
clients mainly concentrated in the surrounding area, but is licensed to conduct
business throughout the state of Mississippi.
Cash and Cash Equivalents - The Company considers all highly liquid investments
- --------------------------
purchased with an original maturity of three months or less to be cash and cash
equivalents. As of December 31, 2003, the Company held no investments in
financial institutions in excess of federally insured limits.
Property and Equipment - Property and equipment is stated at cost with
- ------------------------
depreciation calculated using the straight-line method over the estimated useful
lives. The Company has estimated the useful lives of all assets at five years
as of December 31, 2003. When assets are retired or otherwise removed from the
accounts, any resulting gain or loss is reflected in income for the period. The
cost of maintenance and repairs is charged to expense as incurred, and
significant renewals and improvements are capitalized.
Revenue Recognition - Revenues are recognized as services are provided to
- --------------------
patients.
Allowance for Doubtful Accounts - Earnings are charged with a provision for
- ----------------------------------
doubtful accounts based on a current review of the collectibility of accounts.
Accounts deemed uncollectible are applied against the allowance for doubtful
accounts.
Income Taxes - The liability method is used in accounting for income taxes.
- -------------
Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using anticipated tax rates and laws that will be in effect
when the differences are expected to reverse. The realizability of deferred tax
assets are evaluated annually and a valuation allowance is provided if it is
more likely than not that the deferred tax assets will not give rise to future
benefits in Mississippi's tax returns. Management has analyzed the differences
between book and tax depreciation which consists of depreciation, and has
determined that the amount of deferred tax difference is negligible. Under
these conditions, management has made no provision for deferred tax liabilities.
Advertising - Advertising costs are charged to expense in the period incurred.
- -----------
The Company incurred advertising costs of $4,498 and $5,568 in the years ended
December 31, 2003 and 2002, respectively.
Use of Estimates - The preparation of financial statements in conformity with
- ------------------
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and
See accompanying summary of accounting policies and notes to financial
statements.
14
MISSISSIPPI CENTRAL REHABILITATION, INC.
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Note 2 - Furniture and Equipment
Furniture and equipment consisted of the following as of December 31, 2003:
Furniture and office equipment $ 5,441
Transportation equipment 29,461
---------
34,902
Less: accumulated depreciation (14,564)
---------
$ 20,338
=========
Note 3 - Income Taxes
The components of income tax expense (benefit) for the years ended December 31,
2003 and 2002 were as follows:
2003 2002
------ -------
Current:
Federal $2,500 $10,423
State 1,000 3,898
Deferred:
Federal - -
State - -
------ -------
Total tax expense (benefit) $3,500 $14,321
====== =======
Note 4 - Commitments and Contingencies
The Company has a lease for office space on a month to month basis. In addition,
the Company leases an apartment on a twelve month lease. Total rent expense for
this lease was approximately $28,000 and $26,000 for each of the years ended
December 31, 2003 and 2002, respectively.
Note 5 - Related-Party Transactions
The Company has employment agreements with its' two shareholders. Under the
terms of these agreements, portions of net profits are paid to the shareholders
based on amounts to be agreed upon by vote. These amounts and the timing of
distribution are solely at the discretion of the two shareholders of record.
See accompanying summary of accounting policies and notes to financial
statements.
15
MISSISSIPPI CENTRAL REHABILITATION, INC.
The shareholders of record own and operate a management company. The Company
has entered into a management agreement with this management company to provide
management services. The Company paid discretionary management fees to this
related party of $184,000 and $165,950 in the years ended December 31, 2003 and
2002, respectively.
Note 6 - Subsequent Events
Effective July 16, 2004, the Company sold all assets and the majority of the
liabilities to Bluestar Health, Inc. ("Bluestar"), a U.S. public company. The
Company's stockholders' received 575,000 shares of Bluestar common stock.
16
Canton Rehabilitation Clinic Unaudited Financial Statements
-----------------------------------------------------------
for interim period ended June 30, 2004.
---------------------------------------
17
CANTON REHABILITATION SERVICES, INC.
Balance Sheet
June 30, 2004
(Unaudited)
ASSETS
------
CURRENT ASSETS:
Cash $ 61,588
Accounts receivable, net of allowance of $0 29,579
Prepaid expenses and other current assets 5,960
--------
Total current assets 97,127
PROPERTY AND EQUIPMENT, NET 20,911
--------
Total assets $118,038
========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 14,859
Accrued expenses 621
Due to affiliate 11,800
Current portion of long-term debt 5,767
--------
Total current liabilities 33,047
LONG-TERM DEBT 12,002
--------
Total liabilities 45,049
SHAREHOLDERS' EQUITY
Common stock, $1 par value, 1,000 shares authorized,
1,000 issued and outstanding 1,000
Retained Earnings 71,989
--------
Total shareholders' equity 72,989
--------
Total liabilities and shareholders' equity $118,038
========
18
CANTON REHABILITATION SERVICES, INC.
Statements of Operations and Changes in Shareholders' Equity
Six months Ended June 30,
--------------------------
2004 2003
------------ ------------
(unaudited) (unaudited)
Revenues $ 229,555 $ 232,220
Operating Expenses 226,805 209,526
------------ ------------
Net Income 2,750 22,694
============ ============
Net income per share:
Basic and diluted $ 3 $ 23
============ ============
Weighted average shares outstanding:
Basic and diluted 1,000 1,000
============ ============
19
CANTON REHABILITATION SERVICES, INC.
Statements of Cash Flows
Six Months Ended June 30,
--------------------------
2004 2003
------------ ------------
(unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,750 $ 22,694
Changes in assets and liabilities:
Accounts receivable (15,303) (27,199)
Accrued expenses and accrued expenses 12,735 (8,610)
------------ ------------
Net cash provided by (used in) operating activities 182 (13,115)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (514)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Shareholder advances, net 7,600 4,000
Repayment of long-term debt (2,269) (2,269)
------------ ------------
Net cash provided by financing activities 5,331 1,731
------------ ------------
NET CHANGE IN CASH 5,513 (11,898)
CASH, beginning of year 56,075 25,565
------------ ------------
CASH, end of year $ 61,588 $ 13,667
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ - $ -
============ ============
Taxes paid $ - $ -
============ ============
20
CANTON REHABILITATION SERVICES, INC.
Notes to unaudited Interim Financials
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Canton Rehabilitation
Services, Inc. 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 elsewhere in
this Form 8-K filing. 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 periods 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 for the most recent fiscal year
2003 as reported elsewhere in this filing, have been omitted.
21
Canton Rehabilitation Clinic Audited Financial Statements as of December 31,
----------------------------------------------------------------------------
2003.
-----
22
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Canton Rehabilitation Services, Inc.
Canton, Mississippi
We have audited the accompanying balance sheet of Canton Rehabilitation
Services, Inc. as of December 31, 2003, and the related statements of
operations, shareholders' equity, and cash flows for each of the two years then
ended. 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 audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes 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 Canton Rehabilitation Services,
Inc. as of December 31, 2003, and the results of its operations and its cash
flows for each of the two years then ended in conformity with accounting
principles generally accepted in the United States of America.
/s/ Lopez, Blevins, Bork & Associates, L.L.P.
LOPEZ, BLEVINS, BORK & ASSOCIATES, L.L.P.
Houston, Texas
September 15, 2004
23
CANTON REHABILITATION SERVICES, INC.
BALANCE SHEET
DECEMBER 31, 2003
ASSETS
CURRENT ASSETS:
Cash $56,075
Accounts receivable, net of allowance of $0 14,276
Prepaid expenses and other current assets 5,960
-------
Total current assets 76,311
PROPERTY AND EQUIPMENT, NET 20,912
-------
Total assets $97,223
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,453
Accrued expenses 5,493
Current portion of long-term debt 5,767
-------
Total current liabilities 12,713
LONG-TERM DEBT 14,271
-------
Total liabilities 26,984
SHAREHOLDERS' EQUITY
Common stock, $1 par value, 1,000 shares authorized,
1,000 issued and outstanding 1,000
Retained Earnings 69,239
-------
Total shareholders' equity 70,239
-------
Total liabilities and shareholders' equity $97,223
=======
See accompanying summary of accounting policies and notes to financial
statements.
24
CANTON REHABILITATION SERVICES, INC.
STATEMENTS OF OPERATIONS
Years Ended December 31,
------------------------
2003 2002
----------- -----------
Revenues $ 476,572 $ 455,324
Operating Expenses 436,509 462,504
----------- -----------
Income (Loss) Before Income Tax Expense 40,063 (7,180)
Income Tax Expense 6,969 -
----------- -----------
Net Income (Loss) 33,094 (7,180)
=========== ===========
Net income (loss) per share:
Basic and diluted $ 33 $ (7)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and diluted 1,000 1,000
=========== ===========
See accompanying summary of accounting policies and notes to financial
statements.
25
CANTON REHABILITATION SERVICES, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
Years Ended December 31, 2003
Common Stock Retained
Shares Amount Earnings Total
-------- ------- ---------- --------
Balances, December 31, 2001 1,000 $ 1,000 $ 43,325 $44,325
Net loss - - (7,180) (7,180)
-------- ------- ---------- --------
Balances, December 31, 2002 1,000 1,000 36,145 37,145
Net income - - 33,094 33,094
-------- ------- ---------- --------
Balances, December 31, 2003 1,000 $ 1,000 $ 69,239 $70,239
======== ======= ========== ========
See accompanying summary of accounting policies and notes to financial
statements.
26
CANTON REHABILITATION SERVICES, INC.
STATEMENTS OF CASH FLOWS
Years Ended December
--------------------
31,
---
2003 2002
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 33,094 $(7,180)
Adjustments to reconcile net income (loss) to cash
provided from (used in) operating activities:
Depreciation 6,976 6,489
Changes in assets and liabilities:
Accounts receivable 15,104 2,611
Prepaid expenses and other current assets (5,960) 1,000
Accounts payable (1,885) (5,977)
Accrued expenses (11,004) 1,026
--------- --------
Net cash provided by (used in) operating activities 36,325 (2,031)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (514) (750)
--------- --------
Net cash used in investing activities (514) (750)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (5,301) (4,122)
--------- --------
Net Change in Cash 30,510 (6,903)
CASH, beginning of year 25,565 32,468
--------- --------
CASH, end of year $ 56,075 $25,565
========= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 1,958 $ 1,927
========= ========
Taxes paid $ 11,489 $10,509
========= ========
NON CASH FINANCING ACTIVITIES:
Property and equipment acquired with note payable $ - $29,461
========= ========
See accompanying summary of accounting policies and notes to financial
statements.
27
Note 1 - Nature of Operations and Summary of Significant Accounting Policies
Canton Rehabilitation Services, Inc. (the Company) was incorporated in 2001
under the laws of the state of Mississippi. The Company was created to provide
rehabilitation services to persons suffering from physical stress due to injury
or age. The Company operates from one office located in Canton, Mississippi.
The Company services the general public and business clients mainly concentrated
in the surrounding area, but is licensed to conduct business throughout the
state of Mississippi.
Cash and Cash Equivalents - The Company considers all highly liquid investments
- --------------------------
purchased with an original maturity of three months or less to be cash and cash
equivalents. As of December 31, 2003, the Company held no investments in
financial institutions in excess of federally insured limits.
Property and Equipment - Property and equipment is stated at cost with
- ------------------------
depreciation calculated using the straight-line method over the estimated useful
lives. The Company has estimated the useful lives of all assets at five years
as of December 31, 2003. When assets are retired or otherwise removed from the
accounts, any resulting gain or loss is reflected in income for the period. The
cost of maintenance and repairs is charged to expense as incurred, and
significant renewals and improvements are capitalized.
Revenue Recognition - Revenues are recognized as services are provided to
- --------------------
patients.
Allowance for Doubtful Accounts - Earnings are charged with a provision for
- ----------------------------------
doubtful accounts based on a current review of the collectibility of accounts.
Accounts deemed uncollectible are applied against the allowance for doubtful
accounts.
Income Taxes - The liability method is used in accounting for income taxes.
- -------------
Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using anticipated tax rates and laws that will be in effect
when the differences are expected to reverse. The realizability of deferred tax
assets are evaluated annually and a valuation allowance is provided if it is
more likely than not that the deferred tax assets will not give rise to future
benefits in Canton's tax returns. The provision for federal income taxes is
$6,969 and $0 for the years ended December 31, 2003 and 2002, respectively.
Management has analyzed the differences between book and tax depreciation, and
has determined that the amount of deferred tax difference is negligible. Under
these conditions, management has made no provision for deferred tax liabilities.
Advertising - Advertising costs are charged to expense in the period incurred.
- -----------
The Company incurred advertising costs of $13,440 and $4,003 in the years ended
December 31, 2003 and 2002, respectively.
Use of Estimates - The preparation of financial statements in conformity with
- ------------------
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
See accompanying summary of accounting policies and notes to financial
statements.
28
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Note 2 - Furniture and Equipment
Furniture and equipment consisted of the following as of December 31, 2003:
Furniture and office equipment $ 5,441
Transportation equipment 29,461
---------
34,902
---------
Less: accumulated depreciation (13,990)
---------
$ 20,912
=========
Depreciation expense for the years ended December 31, 2003 and 2002 totaled
$6,976 and $6,489, respectively.
Note 3 - Long-Term Debt
The Company has a note payable with Merchant & Farmers Bank with monthly
payments totaling $605 including interest of 8.5%, secured by an automobile.
The balance due at December 31, 2003 was $20,038 with future maturities as
follows:
Year Ending
December 31, Amount
- ------------- -------
2004 $ 5,767
2005 6,283
2006 6,841
2007 1,147
-------
20,038
=======
Note 4 - Commitments and Contingencies
The Company has a lease for office space on a month to month basis. Total rent
expense for this lease was $19,200 for each of the years ended December 31, 2003
and 2002.
Note 5 - Related-Party Transactions
The Company has employment agreements with its' two shareholder. Under the terms
of these agreements, portions of net profits are paid to the shareholders based
on amounts to be agreed upon by vote. These amounts and the timing of
distribution are solely at the discretion of the two shareholders of record.
See accompanying summary of accounting policies and notes to financial
statements.
29
The shareholders of record own and operate a management company. The Company has
entered into a management agreement with this management company to provide
management services. The Company paid discretionary management fees to this
related party of $115,000 and $218,400 in the years ended December 31, 2003 and
2002, respectively.
Note 6 - Subsequent Events
Effective July 16, 2004, the Company sold all assets and the majority of the
liabilities to Bluestar Health, Inc. ("Bluestar"), a U.S. public company. The
Company's stockholders' received 575,000 shares of Bluestar common stock.
See accompanying summary of accounting policies and notes to financial
statements.
30
B. PRO FORMA FINANCIAL INFORMATION.
BLUESTAR HEALTH, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial statements
give effect to the Bluestar Health, Inc.'s ("Bluestar") acquisition of
Mississippi Central Rehabilitation, Inc. ("Mississippi") and Canton
Rehabilitation Services, Inc. ("Canton"). The unaudited pro forma condensed
consolidated balance sheet as of June 30, 2004 assumes that the acquisitions
were consummated on June 30, 2004, and the unaudited pro forma condensed
consolidated statement of operations for the year ended September 30, 2003 and
for the six months ended June 30, 2004 assumes that the acquisitions occurred on
January 1, 2003.
On July 16, 2003, Bluestar issued 1,150,000 shares of its common stock in
exchange for all assets and certain liabilities of Mississippi and Canton. This
transaction was accounted for using the purchase method of accounting and
resulted in Goodwill totaling approximately $137,000. The pro forma adjustments
included in the following unaudited condensed consolidated pro forma financial
statements represent a preliminary determination of the purchase price
allocation based on available information, and there can be no assurance that
the actual adjustments will not differ significantly from such pro forma
adjustments.
The unaudited pro forma condensed consolidated financial statements are not
necessarily indicative of the results that would have occurred if the
acquisition had been consummated as of the indicated dates or of the results
that may occur in the future.
The unaudited pro forma condensed consolidated financial statements should be
read in conjunction with the historical consolidated financial statements of
Bluestar, together with the related notes thereto.
31
BLUESTAR HEALTH, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of June 30, 2004
Bluestar Mississippi Canton Pro Forma
Historical Historical Historical Adjustments Pro Forma
------------ ------------ ----------- ------------ -----------
ASSETS
Current assets:
Cash $ 581 $ 96,073 $ 61,588 $ 158,242
Accounts receivable, trade - 50,761 29,579 80,340
Other - 18,000 5,960 23,960
------------ ------------ ----------- -----------
Total current assets 581 164,834 97,127 262,542
Goodwill - - - 137,000 (1) 137,000
Property and equipment, net 41,247 20,338 20,911 82,496
------------ ------------ ----------- -----------
$ 41,828 $ 185,172 $ 118,038 $ 482,038
============ ============ =========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable and accrued
liabilities $ 105,368 $ 15,515 $ 15,480 $ 136,363
Notes payable 435,923 - 5,767 441,690
Advances from stockholder 228,316 - 11,800 240,116
------------ ------------ ----------- -----------
Total current liabilities 769,607 15,515 33,047 818,169
------------ ------------ ----------- -----------
Long-term debt 7,159 - 12,002 19,161
Stockholders' equity (deficit): (734,938) 169,657 72,989 137,000 (1) (355,292)
------------ ------------ ----------- -----------
Total liabilities and stockholders'
equity (deficit) $ 41,828 $ 185,172 $ 118,038 $ 482,038
============ ============ =========== ===========
32
BLUESTAR HEALTH, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended September 30, 2003 (Bluestar)
and December 31, 2003 (Mississippi and Canton)
Bluestar Mississippi Canton Pro Forma
Historical Historical Historical Adjustments Pro Forma
(March) (June) (June)
------------ ------------- ------------ ------------- -------------
Revenues $ - $ 625,169 $ 476,572 $ 1,101,741
Operating expenses:
General and administrative 576,902 605,571 436,509 1,618,982
Interest 6,900 - - 6,900
------------ ------------- ------------ -------------
583,802 605,571 436,509 1,625,882
------------ ------------- ------------ -------------
Income (loss) before taxes (583,802) 19,598 40,063 (524,141)
Income tax expense - 3,500 6,969 10,469
------------ ------------- ------------ -------------
Net income (loss) $ (583,802) $ 16,098 $ 33,094 $ (534,610)
============ ============= ============ =============
Net loss per share:
Basic and diluted $ (0.06) $ (0.05)
============ =============
Weighted average shares
outstanding:
Basic and diluted 10,002,910 1,150,000 (1) 11,152,910
============ =============
33
BLUESTAR HEALTH, INC.
Unaudited Condensed Consolidated Statement of Operations
For the six months ended March 31, 2004 (Bluestar) and
June 30, 2004 (Mississippi and Canton)
Bluestar Mississippi Canton
Historical Historical Historical Pro Forma
(March) (June) (June) Adjustments Pro Forma
------------ ------------- ------------ -------------- ------------
Revenues $ 29,393 $ 364,167 $ 229,555 $ 623,115
Operating expenses:
General and administrative 404,822 301,190 226,805 932,817
Impairment 482,981 - - 482,981
Interest 17,083 - - 17,083
------------ ------------- ------------ ------------
904,886 301,190 226,805 1,432,881
------------ ------------- ------------ ------------
Loss before income taxes (875,493) 62,977 2,750 (809,766)
Income tax expense - 12,200 - 12,200
------------ ------------- ------------ ------------
Net loss $ (875,493) $ 50,777 $ 2,750 $ (821,966)
============ ============= ============ ============
Net loss per share:
Basic and diluted $ (0.08) $ (0.07)
============ ============
Weighted average shares
outstanding:
Basic and diluted 11,197,301 1,150,000 (1) 12,347,301
============ ============
34
BLUESTAR HEALTH, INC.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
The following pro forma adjustments to the unaudited pro forma financial
statements give effect to the acquisition of Mississippi Central Rehabilitation,
Inc. and Canton Rehabilitation Services, Inc. by Bluestar Health, Inc. Bluestar
issued 1,150,000 shares of common stock valued at $379,500 using the stock price
on the date issued.
The pro forma adjustments are as follows:
(1) To reflect the increase in goodwill related to the acquisitions. The fair
value of the net assets acquired was approximately $243,000 with the
remaining amount of the purchase price allocated to goodwill.
35
EXHIBITS
ITEM NO. DESCRIPTION
- -------- -----------
2.1* Asset Purchase Agreement dated March 9, 2004
2.2* Bill of Sale dated June 14, 2004
2.3* Unsecured Subordinated Promissory Note dated June 14, 2004
2.4* Assignment and Assumption Agreement
* Incorporated by reference from our Current Report on Form 8-K dated
June 16, 2004 and filed with the Commission on July 2, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: September 28, 2004 Bluestar Health, Inc.,
a Colorado corporation
/s/ Alfred Oglesby
-------------------------
By: Alfred Oglesby
Its: President
36