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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2007
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to .
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Commission file number: 000-08835
Bluestar Health, Inc.
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(Exact name of registrant as specified in its charter)
Colorado 84-0736215
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19901 Southwest Freeway, Suite 206
Sugar Land, TX 77479
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(Address of principal executive offices) (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. Yes |_| No |X|
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes |X| No|_|.
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 June 30, 2007, there
were 14,000,504 shares of common stock, par value $0.001 outstanding.
Transitional Small Business Disclosure Format
(check one):
Yes |_| No |X|
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Bluestar Health, Inc.
TABLE OF CONTENTS
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PART I
ITEM 1 Financial Statements 3
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ITEM 2 Managements Discussion and Analysis 9
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ITEM 3 Controls and Procedures 14
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PART II
ITEM 1 Legal Proceedings 14
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ITEM 3 Defaults Upon Senior Securities 15
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ITEM 6 Exhibits and Reports on Form 8-K 15
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2
PART I - FINANCIAL INFORMATION
ITEM 1 Financial Statements
Bluestar Health, Inc.
Consolidated Balance Sheets
March 31, 2007
March 31, September 30,
2007 2006
----------- -----------
(Unaudited)
Assets
Current assets:
Cash $ 65 $ 65
----------- -----------
Total current assets 65 65
----------- -----------
Total assets $ 65 $ 65
=========== ===========
Liabilities
Current liabilities:
Accounts payable $ 84,136 $ 67,866
Accrued expenses 22,657 9,462
Advances from related party -- 238,432
Short term debt 400,000 100,000
Current maturities of long term debt 49,326 --
----------- -----------
Total current liabilities 556,119 415,760
Long term debt 189,106 --
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Total Liabilities 745,225 415,760
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Shareholders' Deficit
Common stock, $.001 par value, 40,000,000 shares authorized,
15,673,546 shares issued and 14,000,504 outstanding 14,001 14,001
Preferred stock, $.01 par value, 10,000,000 shares authorized,
no shares issued and outstanding -- --
Additional paid in capital 2,233,468 2,072,828
Accumulated deficit (2,992,629) (2,502,524)
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Total Shareholders' Deficit (745,160) (415,695)
----------- -----------
Total Liabilities and Shareholders' Deficit $ 65 $ 65
=========== ===========
The accompanying notes are an integral part of
these consolidated financial statements.
3
Bluestar Health, Inc.
Consolidated Statements of Operations
For the Three and Six Months Ended
March 31, 2007 and March 31, 2006
(Unaudited)
Three months ended Six months ended
March 31, March 31, March 31, March 31,
Revenues 2007 2006 2007 2006
------------ ------------ ------------ ------------
Revenues $ -- $ -- $ -- $ --
------------ ------------ ------------ ------------
Total revenues -- -- -- --
------------ ------------ ------------ ------------
Operating Expenses:
General and administrative 391,955 125,718 476,911 166,798
Impairment -- 100,000 -- 100,000
------------ ------------ ------------ ------------
Total operating costs 391,955 225,718 476,911 266,798
------------ ------------ ------------ ------------
Operating loss (391,955) (225,718) (476,911) (266,798)
Interest expense (8,924) (68,503) (13,194) (71,824)
------------ ------------ ------------ ------------
Net loss $ (400,879) $ (294,221) $ (490,105) $ (338,622)
============ ============ ============ ============
Net loss per share:
Basic & Diluted $ (0.03) $ (0.02) $ (0.04) $ (0.02)
============ ============ ============ ============
Weighted average shares outstanding:
Basic & Diluted 14,000,504 13,881,060 14,000,504 13,794,577
============ ============ ============ ============
The accompanying notes are an integral part of
these consolidated financial statements.
4
Bluestar Health, Inc.
Consolidated Statements of Cash Flows
For the Six Months Ended
March 31, 2007 and 2006
(Unaudited)
March 31, March 31,
2007 2006
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Cash flows from operating activities:
Net loss $(490,105) $(338,622)
Adjustments to reconcile net loss to cash used in operating activities:
Stock issued for services 160,640 115,631
Impairment -- 100,000
Note payable issued for compensation expense 300,000 --
Non cash interest expense -- 67,331
Changes to current assets and liabilities:
Accounts payable 16,270 29,389
Accrued expenses 13,195 733
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Net cash used in operating activities -- (25,538)
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Cash flows from investing activities:
Loan receivable -- (100,000)
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Net cash provided by investing activities -- (100,000)
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Cash flows from financing activities:
Proceeds from related party -- 28,778
Proceeds from short term debt -- 100,000
Net payments on long term debt -- (3,213)
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Net cash provided by financing activities -- 125,565
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Net change in cash -- 27
Cash, beginning of year 65 38
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Cash, end of year $ 65 $ 65
========= =========
Supplemental cash flow information:
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Interest paid $ -- $ 4,493
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Taxes paid $ -- $ --
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Non-cash activity:
Paid in capital in liquidation of debts $ -- $ 206,456
Notes payable issued for previous advances from related parties $ 238,432 $ --
The accompanying notes are an integral part of
these consolidated financial statements.
5
Bluestar Health, Inc.
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited interim consolidated financial statements and related notes of
Bluestar Health, Inc. ("Bluestar", the "Company", or "we") have been prepared in
accordance with generally accepted accounting principles and the rules of the
Securities and Exchange Commission ("SEC") applicable to interim financial
statements. Accordingly, certain information and footnote disclosures normally
included in complete financial statements prepared in accordance with generally
accepted accounting principles have been omitted. The accompanying unaudited
interim financial statements and notes should be read in conjunction with the
audited financial statements and notes thereto contained in the Company's Annual
Report on Form 10-KSB for the year ended September 30, 2006.
In the opinion of management, all adjustments, consisting of normal recurring
adjustments and certain non-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 accompanying consolidated financial statements do not include the historical
revenues and expenses associated with the rescinded acquisition described in
Note 2.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported 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. The results
of operations for interim periods are not necessarily indicative of the results
to be expected for the full year.
Stock-Based Compensation
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Effective October 1, 2006, the Company adopted FASB Statement 123R, "Share-Based
Payments" ("Statement 123R") using the modified prospective method. Statement
123R requires public entities to measure the cost of employee services received
in exchange for an award of equity instruments based on the grant-date fair
value of the award (with limited exceptions). That cost will be recognized over
the period during which an employee is required to provide service in exchange
for the award -- the requisite service period (usually the vesting period).
Statement 123R applies to all awards granted after the required effective date
and to awards modified, repurchased or cancelled after that date. Additionally,
compensation cost for the portion of the awards for which the requisite service
has not been rendered that are outstanding as of the required effective date
shall be recognized as the requisite service is rendered on or after the
effective date. No option activity occurred during the quarter.
NOTE 2 - ASSET PURCHASE AGREEMENT
On February 13, 2006, Bluestar entered into an Asset Purchase Agreement (the
"Purchase Agreement") with Bluestar Acquisition, Inc., a Texas corporation and a
wholly-owned subsidiary of Bluestar (the "Bluestar Subsidiary"), Gold Leaf
Homes, Inc., a Texas corporation ("Gold Leaf") and Tom Redmon, the sole
shareholder of Gold Leaf ("Redmon"), whereby Bluestar would acquire
substantially all of Gold Leaf's assets in exchange for 37,000,000 shares of
Bluestar's common stock. Bluestar agreed to increase its authorized common stock
from 40,000,000 shares to 100,000,000 shares in order to issue all the common
stock required to be issued under this transaction.
6
On November 3, 2006 Bluestar entered into an Interim Agreement with Gold Leaf
Homes, Inc., a Texas corporation ("Gold Leaf"), and Tom Redmon ("Redmon"), the
sole shareholder of Gold Leaf, and Alfred Oglesby, an individual ("Oglesby"),
which acknowledged that the acquisition of substantially all of the assets of
Gold Leaf pursuant to the parties February 13, 2006 Asset Purchase Agreement and
associated agreements ("Asset Purchase") had not been consummated and agreed to
the rescission of the transaction. The parties determined that it was
impracticable to consummate the acquisition of Gold Leaf assets due to the
unavailability of audited financial statements of Gold Leaf, a requirement under
the Asset Purchase Agreement.
Bluestar, Gold Leaf, Oglesby and Redmon agreed to rescind the February 13, 2006
Asset Purchase and return the parties as closely as possible to the positions
they were in prior to entering into the Asset Purchase transaction documents.
The parties have affected material elements of the rescission of the Asset
Purchase by this Interim Agreement. Mr. Redmon has appointed Mr. Richard M.
Greenwood his successor as sole director and officer of Bluestar and resigned
from all of his positions as a director and officer with Bluestar. No Gold Leaf
assets were effectively transferred to Bluestar and no Bluestar shares issued to
Redmon. All of the past and current operations of Gold Leaf have been transacted
through Gold Leaf Homes, Inc., a Texas corporation rather than through Bluestar.
The parties continue to work towards the resolution of all remaining issues and
anticipate executing definitive agreements to complete this process prior to the
Company's transaction with Zeon Fuel, Inc.
NOTE 3 - STOCK PURCHASE AND RECAPITALIZATION AGREEMENT
On February 27, 2007 the Company entered into a Stock Purchase and
Recapitalization Agreement ("Zeon Purchase Agreement") with Zeon Fuel, Inc., a
Texas corporation, ("Zeon") pursuant to which Bluestar would acquire all of the
outstanding stock of Zeon in exchange for the issuance of 1,000,000 shares of
Series A Convertible Preferred Stock and 1,000,000 shares of Series B
Convertible Preferred Stock ("Convertible Stock"). The Bluestar Convertible
Stock would be convertible into common stock of Bluestar equivalent to
approximately eighty Percent (80%) of the total issued and outstanding common
stock of Bluestar on a fully diluted basis, subject to certain equitable
adjustments. In addition, the Purchase Agreement would result in the appointment
of four additional directors to the board of directors of Bluestar and the
appointment of two additional executive officers.
Pursuant to the terms of the Zeon Purchase Agreement, which is subject to
approval of Bluestar's shareholders and certain other conditions, the Articles
of Incorporation of Bluestar would be amended and restated to, among other
items, change the company's name to Zeon Global Energy, Inc., and increase the
total authorized capital of Bluestar from 50,000,000 to 220,000,000 shares. The
change in authorized capital would consist of an increase of common shares from
40,000,000 to 200,000,000 shares and an increase of preferred shares from
10,000,000 to 20,000,000.
NOTE 4- COMMON STOCK
During the three months ended March 31, 2007 Bluestar agreed to issue 1,130,486
shares of common stock valued at $81,902 for services including shares to
Richard M. Greenwood, the Company's sole director and officer and Alfred
Oglesby, the Company's largest shareholder. These shares are not yet issued.
NOTE 5 - DEBT
On March 1, 2007 the Company issued two promissory notes to Alfred Oglesby, one
for $238,432 which consolidated and replaced all previous notes for cash
advances and Company expenses paid by Mr. Oglesby through April 30, 2006, and
one for $300,000 as compensation. The promissory notes bear interest at the rate
of 10% commencing March 1, 2007. The $238,432 note is payable in twenty equal
quarterly payments of $16,442 which begin December 1, 2007. The $300,000 note is
a demand note under which Mr. Oglesby may not make demand for more than $40,000
prior to April 1, 2007, and may make demand for the remaining balance no earlier
than 60 days after the closing of the Company's purchase of Zeon, or October 31,
2007, whichever occurs first. Both promissory notes are secured by the grant of
a security interest in all of the assets of the Company.
7
NOTE 6 - SUBSEQUENT EVENTS
On May 21, 2007 Zeon Fuel, Inc., pursuant to the terms of the parties February
27, 2007 Stock Purchase and Recapitalization Agreement, advanced $91,277 to
Bluestar to pay certain accounts payable due ($51,277) and make an initial
payment ($40,000) to Alfred Oglesby under the terms of the $300,000 demand note.
On June 30, 2007 the Company entered into a Consulting Agreement with Richard M.
Greenwood to replace the previous consulting agreement effective July 1, 2006.
The new agreement provides for payment to Mr. Greenwood of $15,000 per month
retroactive to July 1, 2006, the same commencement date and compensation rate as
the earlier agreement under which no payments were made. The agreement also
provides for a success fee of 1,000,000 shares of the common stock of Bluestar
to be paid upon the successful completion of a merger or other business
combination of the Company with an operating company. The consulting fee to Mr.
Greenwood is payable entirely in common stock and the expense reimbursement may
be in either cash or common stock based upon the share price during the period
earned.
On June 30, 2007 Bluestar agreed to an Amended and Restated Consulting and
Indemnity Agreement with Alfred Oglesby to replace the original Consulting
Agreement dated February 13, 2006 and Indemnity Agreement dated October 15,
2005. The restated agreement provides for Oglesby to provide consulting services
in a variety of areas and provide office space, telephone, internet and other
general office services to the Company from March 1, 2006 through the closing of
the Zeon transaction. In addition, effective as of March 31, 2006, the scope of
Mr. Oglesby's obligation to assume Bluestar financial obligations and indemnify
the Company from all liabilities related to the Company's former physical
therapy operations was expanded to include a $70,000 Bluestar debt. Compensation
to Mr. Oglesby is a fee of 1,000,000 shares of Bluestar common stock plus
$11,000 per month payable in cash or Bluestar common stock commencing April 1,
2006 and terminating at the end of the month in which the Zeon transaction
closes.
On June 30, 2007 Bluestar also entered into a consulting agreement with ALO
Investments, Inc., a Texas limited liability company ("ALO") owned by Alfred
Oglesby and Richard Greenwood. This agreement provides for a fee of $15,000 per
month for providing consulting services related to a variety of potential equity
and debt related capital transactions. The Company will pay ALO a transaction
fee equal to 10% of the net proceeds of any sales of equity, 6-8% of the net
proceeds of any term loans and 2-5% of the maximum availability under any line
of credit. The Company will receive credit against transaction fees for all
monthly consulting fees paid to ALO from the commencement of the agreement. The
fees to ALO shall be paid monthly in cash or accrued unless ALO elects to
receive payment in the form of Bluestar common stock at a discount of 25% from
the market price. The agreement is for a term of one year following the closing
of the Zeon transaction and may be terminated by the Company if within six
months of the Zeon closing ALO does not arrange for and close transactions which
bring a specified amount of additional capital to the Company on terms
acceptable to the Company.
ALO will also receive prior to closing the Bluestar transaction with Zeon
2,450,000 shares of Zeon Fuel Inc. common stock from Zeon on a pre-merger basis
which will be convertible into shares on Bluestar common on the same terms as
other Zeon shareholders.
BlueStar Acquisition is a shell entity originally formed to accommodate the Gold
Leaf Home merger. Ultimately, that transaction was rescinded. On June 30, 2007
Bluestar agreed to sell its ownership in BlueStar Acquisition for consideration
of $1.00 to Alfred Oglesby.
On September 5, 2007 Bluestar Health entered into a settlement agreement and
mutual general releases with Gold Leaf Homes, and Tom Redmon and Alfred Oglesby
to rescind which rescinded the attempted acquisition of Gold Leaf assets under
the Asset Purchase Agreement and related agreements originally signed February
13, 2006 and settled claims between the parties. Under the terms of the
agreement no Gold Leaf assets were transferred to BlueStar and no shares were
issued to Gold Leaf Homes or related parties.
8
ITEM 2 Managements Discussion and Analysis
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 quarterly
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 establish or acquire an operating
business, the ability to raise cash or otherwise satisfy not only existing and
delinquent obligations but future costs, general economic downturns, 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
Bluestar Health was in the business of owning and operating licensed outpatient
physical therapy clinics. The Company closed its clinics in May 2005 and
permanently exited that business in October 2005 and determined it would be in
the best interest of the shareholders if the company entered the residential
home building industry. Subsequently the company did enter into a Reorganization
and Purchase Agreement ("Reorganization Agreement") dated October 15, 2005, to
acquire all the outstanding common stock of Gold Leaf Homes, Inc., a Houston
area residential home builder in exchange for 37,000,000 shares of Bluestar
common stock.
On February 13, 2006, we entered into an Asset Purchase Agreement (the "Purchase
Agreement") to acquire substantially all of the assets of Gold Leaf Homes, Inc.
("Gold Leaf") in exchange for the issuance of 37,000,000 shares of our common
stock. This transaction resulted from the renegotiation of the earlier
Reorganization and Purchase Agreement dated October 17, 2005 (the
"Reorganization Agreement") which provided for all of the outstanding stock of
Gold Leaf to be acquired by the Company for substantially equal consideration.
We entered into the Purchase Agreement and terminated the Reorganization
Agreement because during the course of our due diligence, it became apparent
that it was in the best interests of our shareholders to structure the
transaction as an asset purchase rather than a stock purchase.
On November 3, 2006 Bluestar Health signed an Interim Agreement with Tom Redmon
and Gold Leaf Homes to rescind the February 13, 2006 Asset Purchase Agreement.
While the attempted acquisition of Gold Leaf Homes assets in 2006 was expected
to benefit BlueStar, closing the transaction became impracticable and we entered
into an agreement to rescind the attempted purchase. The parties continue to
work towards the resolution of all remaining issues and anticipate executing
definitive agreements to complete the rescission and settlement prior to closing
the Company's transaction with Zeon Fuel, Inc.
On February 27, 2007 Bluestar entered into a Stock Purchase and Recapitalization
Agreement with Zeon Fuel, Inc., a Texas corporation, ("Zeon") pursuant to which
Bluestar would acquire all of the outstanding stock of Zeon in exchange for the
issuance of 1,000,000 shares of Series A Convertible Preferred Stock and
1,000,000 shares of Series B Convertible Preferred Stock ("Convertible Stock").
The Bluestar Convertible Stock would be convertible into common stock of
Bluestar equivalent to approximately eighty percent (80%) of the total issued
and outstanding common stock of Bluestar on a fully diluted basis, subject to
certain equitable adjustments. Zeon is a newly formed company in the business of
blending and distributing biodiesel fuel to truck stops and gas stations in the
greater Houston and south central Texas market. We believe the growing desire
for energy independence and the related demand for "renewable" fuel sources
makes this sector an attractive opportunity to acquire an operating business and
generate positive shareholder value.
9
Three Months Ended March 31, 2007 Compared to the Three Months Ended March 31,
2006
Results of Operations
Introduction
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As a result of closing the physical therapy clinics, we did not have revenue for
the three months ending March 31, 2007 and 2006. We do not anticipate any
revenue going forward until we acquire a business in a different industry. We
have signed a Stock Purchase and Recapitalization Agreement with Zeon Fuel, Inc.
Completion of this transaction should result in the Company once again having
revenue.
Revenues and Net Loss
- ---------------------
Our revenues, general and administrative expenses, interest expense,
and net loss for the quarter ended March 31, 2007, as compared to the quarters
ended March 31, is as follows:
Quarter Quarter
ended ended
March 31, March 31,
2007 2006
---------- ----------
Revenues $ -- $ --
General and administrative 391,955 125,718
Bad debt expense -- 100,000
Depreciation -- --
Interest expense 8,924 68,503
---------- ----------
Net loss $ (400,879) $ (294,221)
========== ==========
Revenues
- --------
Our revenues were $0 for the quarters ended March 31, 2007 and 2006 due to the
fact we closed the two clinics in May, 2005. Unless we acquire an operating
business we will not have any revenues.
General and Administrative Expenses
- -----------------------------------
Our general and administrative expenses were $391,955 for the quarter ended
March 31, 2007, compared to $125,718 for the same period one year ago. The
increase in general and administrative expenses this year compared to last year
is due entirely to the recording of $300,000 compensation to Alfred Oglesby
during the three months ended March 31, 2007.
Other Significant Expenses
- --------------------------
During the comparable three month period last year, the Company recognized an
impairment of $100,000 to establish a reserve for the obligation due from Gold
Leaf Homes.
Non Cash Stock Issued for Services
- ----------------------------------
During the three month period ended March 31, 2007 Bluestar committed to issue
1,091,830 shares of common stock for services performed by Greenwood and Oglesby
and 38,656 shares related to an agreement with a third party for services
10
previously provided. The shares of common are pending issuance and have been
recorded as an increase to paid-in capital of $81,092. (See "NOTE 4 - COMMON
STOCK")
For the quarter ended March 31, 2006, we issued 250,000 shares of common stock
valued at $40,000 for services and Bluestar agreed to issue 1,000,000 shares to
Alfred Oglesby as part of an agreement under which Mr. Oglesby agreed to assume
all of the Company's debts and other obligations related to the former physical
therapy operations and indemnify the Company from related liabilities. The
physical therapy related debt on Bluestar's Balance Sheet at December 31, 2005
totaled $206,456. Bluestar also settled a previous commitment to third parties
for consulting services totaling 386,560 shares of common stock valued at
$54,117.
Interest Expense
- ----------------
Interest expense for the current period was $8,924 compared to $68,503 in the
comparable period of the prior year. The higher interest expense of the prior
year related to a charge of $67,331 to recognize the relative value (cost) of
the warrants issued in the quarter ended March 31, 2006.
Net Loss
- --------
Our net loss for the three months ended March 31, 2007 was ($400,879), compared
to ($294,221) for the three months ended March 31, 2006. This increase in our
net loss this year compared to last year is due to $300,000 in compensation paid
to Alfred Oglesby during the three months ended March 31, 2007. (See "NOTE 6 -
DEBT") We anticipate our adjusted net loss of approximately ($85,000) for the
three months ended March 31, 2007 will be fairly indicative of our net loss for
future three-month periods if we have not acquired another business or incurred
costs related to a prospective business transaction.
Six Months Ended March 31, 2007 Compared to the Six Months Ended March 31, 2006
Results of Operations
Introduction
- ------------
As a result of our exiting the physical therapy clinics, we did not have revenue
for the six months ending March 31, 2007 and 2006. We do not anticipate any
revenue going forward until we acquire a business in a different industry. We
have signed a Stock Purchase and Recapitalization Agreement with Zeon Fuel, Inc.
, a recently formed corporation engaged in the bio-fuels business. Completion of
this transaction would result in the Company once again having revenue.
Revenues and Net Loss
- ---------------------
Our revenues, general and administrative expenses, interest expense, and net
loss for the six months ended March 31, 2007, as compared to the six months
ended March 31, 2006, are as follows:
Six Six
Months Months
ended ended
March 31, March 31,
2007 2006
------------ ------------
Revenues $ -- $ --
General and administrative 476,911 166,798
Bad debt expense -- 100,000
Depreciation -- --
Interest expense (13,194) (71,824)
------------ ------------
Net loss $ (490,105) $ (338,622)
============ ============
11
Revenues
- --------
As noted above, the Company had no revenues for the six month periods ending
March 31, 2007 and 2006. Unless we acquire an operating business or assets we
will not have any revenues.
General and Administrative Expenses
- -----------------------------------
Our general and administrative expenses were $476,911 for the six months ended
March 31, 2007, compared to $166,798 during the same period one year ago. The
increase in general and administrative expenses this year compared to last year
is due to $300,000 in compensation paid to Alfred Oglesby during the three
months ended March 31, 2007.
Other Significant Expenses
- --------------------------
During the six month period last year, the Company recognized a bad debt expense
of $100,000 to establish a reserve for the obligation due from Gold Leaf Homes.
Non Cash Stock Issued for Services
- ----------------------------------
During the six month period ended March 31, 2007 Bluestar committed to issue
2,763,259 shares of common stock in payment for services performed by Greenwood
and Oglesby and 77,312 shares pursuant to an agreement with a third party for
services previously provided. The shares of common stock are pending issuance
and have been recorded as an increase to paid-in capital of $160,640.
For the six months ended March 31, 2006, we issued 250,000 shares of common
stock valued at $40,000 for services and Bluestar agreed to issue 1,000,000
shares to Alfred Oglesby as part of an agreement under which Mr. Oglesby agreed
to assume all of the Company's debts and other obligations related to the former
physical therapy operations and indemnify the Company from related liabilities.
The physical therapy related debt on Bluestar's Balance Sheet at December 31,
2005 totaled $206,456. Bluestar also settled a previous commitment to third
parties for consulting services totaling 386,560 shares of common stock valued
at $54,117.
Interest Expense
- ----------------
Interest expense for the period was $13,194 compared to $71,824 in the
comparable period of the prior year after a charge of $67,331 to recognize the
relative value (cost) of warrants issued in the quarter. Excluding the warrant
expense, the current six month period interest cost is higher as interest
bearing obligations related to the Company's reorganization increased
considerably.
Net Loss
- --------
Our net loss for the six months ended March 31, 2007 was ($490,105) compared to
($338,622) for the six months ended March 31, 2006. The increase this year
compared to last year is due to $300,000 in compensation paid to Alfred Oglesby
during the three months ended March 31, 2007.
Liquidity and Capital Resources
Introduction
- ------------
The Company has not operated profitably for several years, and does 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 advanced by
12
our majority stockholder or borrowed from others and guaranteed by our majority
stockholder, Alfred Oglesby. The completion of the merger with Zeon Fuel, Inc.,
will have an unknown impact on our future financial condition.
Our cash, total current assets, total assets, total current liabilities, and
total liabilities as of March 31, 2007 and September, 30, 2006 are as follows:
March 31, September
2007 30, 2006 Change
=========== ----------- -----------
Cash $ 65 $ 65 $ 0
Total current assets 65 65 0
Total assets 65 65 0
Total current liabilities 556,119 415,760 140,359
Total liabilities 745,225 415,760 329,465
Cash Requirements
- -----------------
The Company's cash requirements consist primarily of general and administrative
expenses maintaining our status as a public company, certain debt payments that
come due or are in default and anticipated transaction expenses related to
acquiring or building an operating business.
Sources and Uses of Cash
- ------------------------
Operations
The Company had no revenue or ongoing operations as of March 31, 2007. The
completion of the merger with Zeon Fuel, Inc., will have an unknown impact on
our future financial condition.
Financing
During the Quarter ending March 31, 2007, no funding was received. Expenses for
services acquired were either accrued or will be paid in shares of Company
common stock based on individual agreements.
Debt Instruments, Guarantees, and Related Covenants
- ---------------------------------------------------
We have three primary debt obligations. The first obligation is a $100,000
principal amount note that was further advanced to the Gold Leaf Homes business
operations. Our principal shareholder, Mr. Alfred Oglesby, has personally
guaranteed the note and pledged 600,000 shares of his Bluestar common stock as
collateral. The other obligation are promissory notes due to Mr. Oglesby.
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
Currently the Company has no sources of revenue. However, in the past our
revenue recognition policy was objective in that we recognized revenue when
services were performed. Accordingly, there were no estimates or assumptions
that caused deviation from our revenue recognition policy.
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Accounting for Stock-Based Compensation
Effective October 1, 2006, the Company adopted FASB Statement 123R, "Share-Based
Payments" ("Statement 123R") using the modified prospective method. Statement
123R requires public entities to measure the cost of employee services received
in exchange for an award of equity instruments based on the grant-date fair
value of the award (with limited exceptions). That cost will be recognized over
the period during which an employee is required to provide service in exchange
for the award -- the requisite service period (usually the vesting period).
Statement 123R applies to all awards granted after the required effective date
and to awards modified, repurchased or cancelled after that date. Additionally,
compensation cost for the portion of the awards for which the requisite service
has not been rendered that are outstanding as of the required effective date
shall be recognized as the requisite service is rendered on or after the
effective date. No option activity occurred during the quarter.
ITEM 3 Controls and Procedures
As of the end of the period covered by this Quarterly Report, the Company's
Chief Executive Officer and Chief Financial Officer evaluated 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)
and have concluded that 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 significant changes in the Company's internal controls over financial
reporting when Mr. Greenwood became the sole director and officer on November 3,
2006. The Company's internal controls and financial reporting systems were
substantially strengthened.
PART II
ITEM 1 Legal Proceedings
On or about January 25, 2007 management was informed that on November 11, 2006
BlueStar Health, Inc. and BlueStar Acquisition, Inc., a shell subsidiary of
BlueStar Health, Inc (inactive) were added as co-defendants in a lawsuit
originally filed April 24, 2004 which included as original defendants Gold Leaf
Homes and Thomas Redmon. The suit is Cause No. 2004-19989; Home Loan Corporation
vs. Alvin Mark Eiland, et al filed in the 333rd Judicial District Court of
Harris County, Texas. The lawsuit was brought by the lender which loaned money
to the buyers of two homes built by Gold Leaf and alleges statutory fraud,
breach of contract, breach of fiduciary duty and negligence in the sale and
financing of two homes by Gold Leaf before its attempted acquisition by
Bluestar. The purchasers subsequently defaulted on the loans and the lender
repossessed both properties. The Company has filed a general denial with the
333rd Judicial District Court of Harris County, Texas. The lawsuit seeks
compensatory and punitive damages and attorney's fees from all defendants. The
lawsuit was filed prior to BlueStar Health, Inc. entering into an agreement with
Gold Leaf Homes, Inc. and its owner Thomas Redmon; however, the company was not
advised by Gold Leaf Homes or Mr. Redmon of the lawsuit. Management believes
there is low probability of any adverse impact on the Company or its subsidiary
BlueStar Acquisitions, Inc. except for the costs to defend the action.
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.
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ITEM 3 Defaults Upon Senior Securities
The Company is in default under substantially all of its debt obligations for
which payment was due prior the date of filing this report. (see "Note 6 Debt"
and "Managements Discussion and Analysis - Debt Instruments, Guarantees and
Related Covenants").
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
10.1 (6) Promissory Note to Brass Bulls Corp.
10.2 (6) Warrant to Brass Bulls Corp.
10.3 (3) Reorganization and Purchase Agreement dated October 15, 2005.
10.4 (4) Asset Purchase Agreement dated February 13, 2006
10.5 (4) Transitional Agreement dated February 13, 2006
10.6 (4) Escrow Agreement dated February 13, 2006
10.7 (4) Consulting Agreement dated February 13, 2006
10.8 (4) Convertible Promissory Note dated February 13, 2006
10.9 (5) Interim Agreement dated effective as of November 3, 2006 between
Bluestar Health, Inc., Gold Leaf Homes, Inc., Tom Redmon and
Alfred Oglesby.
10.10 (6) Stock Purchase and Recapitalization Agreement dated February 27,
2007.
10.11 (6) Promissory Note for $238,432 payable to Alfred Oglesby dated
March 1, 2007.
10.12 (6) Promissory Note for $300,000 payable to Alfred Oglesby dated
March 1, 2007.
10.13 (6) Consulting Agreement dated June 30, 2007 between the Company and
Richard M. Greenwood.
10.14 (6) Amended and Restated Consulting and Indemnity Agreement between
the Company and Alfred Oglesby, dated June 30, 2007.
10.15 (6) Consulting Agreement between the Company and ALO Investments,
LLC, dated June 30, 2007.
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10.16 (7) Settlement Agreement and Mutual General Releases between the
Company, Gold Leaf Homes, Inc., Tom Redmon and Alfred Oglesby,
dated as of August 15, 2007.
31 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
and Chief Financial Officer
32 Chief Executive Officer and 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.
(3) Incorporated by reference from our Report on Form 8-K filed
with the Commission on October 21, 2005
(4) Incorporated by reference from our Report on Form 8-K filed
with the Commission on February 21, 2006.
(5) Incorporated by reference from our Report on form 8-K filed
with the Commission on November 3, 2006.
(6) Incorporated by reference from our Report on Form 10-QSB for
the period ended March 31, 2006, filed with the Commission
on September 5, 2007.
(7) Incorporated by reference from our Report on Form 10-QSB for
the period ended December 31, 2006, filed with the
Commission on September 13, 2007.
(b) Reports on Form 8-K
On October 21, 2005, we filed a Report on Form 8-K regarding our entry into
a Reorganization and Purchase Agreement for the acquisition of Gold Leaf Homes,
Inc., a Texas corporation, which was to close on or about November 20, 2005.
However, as noted above, on February 17, 2006, we filed a Report on Form 8-K
disclosing that the Reorganization and Purchase Agreement had been terminated in
favor of an Asset Purchase Agreement among the same parties. On March 5, 2007 we
filed a Report on Form 8-K disclosing the rescission of the Asset Purchase
Agreement and execution of a Stock Purchase and Reorganization Agreement with
Zeon Fuel, Inc.
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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: September 12, 2007 Bluestar Health, Inc.
By: /s/ Richard M. Greenwood
--------------------------------
Richard M. Greenwood
President and
Chief Financial Officer
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