UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2001
Or
[ ] TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission File Number: 000-32745
Blue Star Coffee, Inc.
(Exact name of registrant as specified in its charter)
Nevada 88-0471353
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
500 N. Rainbow, Suite 300, Las 89107
Vegas, NV (Zip Code)
(Address of principal executive
offices)
(503) 297-2833
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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 [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
5,692,787
PAGE-1-
BLUE STAR COFFEE, INC.
(A Development Stage Company)
Table of Contents
Page
PART I - FINANCIAL INFORMATION -----
Item 1. Financial Statements
Independent Accountant's Review Report 5
Balance Sheets 6
Statement of Operations, Accumulated Deficit, and Comprehensive 7
Income
Statement of Changes in Stockholders' Equity 8
Statement of Cash Flows 9
Notes to Financial Statements 10
Item 2. Management's Discussion and Plan of Operation 16
PART II - OTHER INFORMATION
Item 6. Exhibits 18
SIGNATURES 19
PAGE-2-
BLUE STAR COFFEE, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(UNAUDITED)
PAGE-3-
CONTENTS
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
FINANCIAL STATEMENTS
Balance Sheets 1
Statements of Operations, Accumulated Deficit, and 2
Comprehensive Income
Statement of Changes in Stockholders' Equity 3
Statements of Cash Flows 4
NOTES TO FINANCIAL STATEMENTS 5-10
PAGE-4-
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
To the Board of Directors of
Blue Star Coffee, Inc.:
We have reviewed the accompanying balance sheets of Blue Star
Coffee, Inc. (a development stage company) as of September 30,
2001, and the related statements of operations, accumulated deficit
and comprehensive income, changes in stockholders' equity, and cash
flows for the period from July 1 , 2001 through September 30, 2001,
in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified
Public Accountants. All information included in these financial
statements is the representation of the management of Blue Star
Coffee, Inc.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to financial data. It is
substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements in
order for them to be in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. As disclosed in Note
7 to these financial statements, the Company has had limited
operations and has not established a long-term source of revenue.
This raises substantial doubt about its ability to continue as a
going concern. Management's plan in regards to this issue is also
described in Note 7. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Chavez & Koch, CPA's, Ltd.
November 5, 2001
Henderson, Nevada
PAGE-5-
PART I - FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
BLUE STAR COFFEE, INC.
(A Development Stage company)
BALANCE SHEETS
AS OF SEPTEMBER 30, 2001
(UNAUDITED)
9/30/01 9/30/00 6/30/01 12/31/00
-----------------------------------------
ASSETS
CURRENT ASSETS:
Cash
$ 11,657 $ 20,907 $ 15,188 $ 20,907
Stockholder receivable - 5,000 15,000 5,000
Marketable securities 7,000 - - -
Prepaid expenses - 4,084 6,750 4,084
Total current assets 18,657 29,991 36,938 29,991
-----------------------------------------
FIXED ASSETS:
Equipment 1,507 - - -
Less: Accumulated depreciation (61) - - -
Total fixed assets 1,446 - - -
-----------------------------------------
TOTAL ASSETS $ 20,103 $ 29,991 $ 36,938 $ 29,991
=========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Loan from shareholders $ 27,470 $ - $ - $ -
Total liabilities 27,470 - - -
STOCKHOLDERS' EQUITY:
Common stock; 20,000,000 authorized;
5,692,787 issued and outstanding
as of September 30, 2001; Par value 5,693 2,817 3,588 2,817
of $.0001
Preferred stock; 5,000,000
authorized;
None issued and outstanding; Par - - - -
value of $.001
Additional paid in capital 349,976 109,383 224,231 109,383
Subscribed stock (126,350) (82,100) (46,250) (82,100)
Accumulated deficit in development (236,686) (109) (144,631) (109)
stage
Accumulated other comprehensive
income:
Unrealized gain on securities - - - -
Total stockholders' equity (7,367) 29,991 36,938 29,991
----------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' $ $ $
EQUITY $ 20,103 $ 29,991 $ 36,938 $ 29,991
========================================
The accompanying independent accountants' report and the notes to
financial statements should be
read in conjunction with these Balance Sheets.
PAGE-6-
BLUE STAR COFFEE, INC.
(A Development Stage company)
STATEMENTS OF OPERATIONS, ACCUMULATED DEFICIT, AND COMPREHENSIVE
INCOME
FOR THE PERIOD JULY 1, 2001 TO SEPTEMBER 30, 2001
(UNAUDITED)
7/1/01 Inception 1/1/01 Inception
to to to to
9/30/01 9/30/00 9/30/01 9/30/01
-----------------------------------------
REVENUES $ - $ - $ - $ -
COST OF REVENUES - - - -
Gross Profit - - - -
EXPENSES:
General and administrative 90,555 109 235,077 235,186
Executive compensation 1,500 - 1,500 1,500
Total expenses 92,055 109 236,577 236,686
Loss before taxes (92,055) (109) (236,577) (236,686)
Income tax expense - - - -
NET LOSS (92,055) (109) (236,577) (236,686)
OTHER COMPREHENSIVE INCOME
Unrealized gains on securities
Unrealized holding gains arising - - - -
during the period
Less reclassification adjustment - - - -
for gains included in net income
Net unrealized gains on securities - - - -
Income tax expense related to - - - -
other comprehensive income
OTHER COMPREHENSIVE INCOME - - - -
TOTAL COMPREHENSIVE INCOME (92,055) (109) (236,577) (236,686)
ACCUMULATED DEFICIT, beginning of (144,631) - (109) -
period
ACCUMULATED DEFICIT, end of period
$(236,686) $(109) $(236,686) $(236,686)
==========================================
Weighted average number of 4,289,454 2,817,000 3,564,747 3,165,648
shares outstanding
Net loss per share $(0.06) $(0.00) $(0.07) $(0.07)
The accompanying independent accountants' report and the notes to
financial statements should be
read in conjunction with these Statements of Operations,
Accumulated Deficit, and Comprehensive Income.
PAGE-7-
BLUE STAR COFFEE, INC.
(A Development Stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM INCEPTION TO JUNE 30, 2001
(UNAUDITED)
Common Stock Add'l Subscribed Income/ Total
Paid Stock (Loss) Stockholders'
In Accumulated Equity
Capital Dev Stage
/
Donated
Capital
Shares Value
------ ----- ------- -------- ----------- -----------
Issued for cash
July 29, 2000 2,167,000 $2,167 $ 27,933 $ - $ - $ 30,100
Issued for
prepaid expenses
July 29, 2000 150,000 150 22,350 (22,500) - -
Issued for note
receivable
September 21, 100,000 100 9,900 (10,000) - -
2000
Issued for
prepaid expenses
September 21, 400,000 400 49,200 (49,600) - -
2000
Net loss
September 30, - - - - (109) (109)
2000
Total
September 30, 2,817,000 2,817 109,383 (82,100) (109) 29,991
2000
Issued for cash
March 30, 2001 770,787 771 114,848 - - 115,619
Subscribed stock
March 31, 2001 - - - 35,850 - 35,850
Net loss
March 31, 2001 - - - - (57,332) (57,332)
Total
March 31, 2001 3,587,787 3,588 224,231 (46,250) (57,441) 124,128
Net Loss
June 30, 2001 - - - - (87,190) (87,190)
Total
June 30, 2001 3,587,787 3,588 224,231 (46,250) (144,631) 36,938
Subscribed stock
September 30, - - - 46,250 - 46,250
2001
Issued for prepaid
expense
September 30, 605,000 605 125,745 (126,350) - -
2001
Issued for executive
compensation
September 30, 1,500,000 1,500 - - - 1,500
2001
Net loss
September 30, - - - - (92,055) (92,055)
2001
Total ----------------------------------------------------------------
September 30, 5,692,787 $5,693 $349,976 $(126,350) $ (236,686) $(7,367)
2001
The accompanying independent accountants' report and the notes to
financial statements should be
read in conjunction with this Statement of Changes in Stockholders'
Equity.
PAGE-8-
BLUE STAR COFFEE, INC.
(A Development Stage company)
STATEMENT OF CASH FLOWS
FOR THE PERIOD JULY 1, 2001 TO SEPTEMBER 30, 2001
(UNAUDITED)
7/1/01 Inception 1/1/01 Inception
to to to to
9/30/01 9/30/00 9/30/01 9/30/01
-------------------------------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $(92,055) $(109) $(236,577) $(236,686)
Adjustment to reconcile net loss
to net cash
from operating activities:
Depreciation 61 - 61 61
Increase in marketable securities (7,000) - (7,000) (7,000)
Increase in stockholder receivable - (5,000) - -
Decrease in prepaid rent expense 6,750 (4,084) 4,084 -
Services provided to pay for 46,250 - 82,100 82,100
subscribed stock
Stock issued for executive bonuses 1,500 - 1,500 1,500
Net Cash Provided by (used in) 47,561 (9,084) 80,745 76,661
Operating Activities
CASH FLOWS FROM INVESTING
ACTIVITIES:
Increase in loan from shareholder 27,470 - 17,470 12,470
Decrease in loan to shareholder 15,000 - 15,000 15,000
Increase in equipment (1,507 - (1,507) (1,507)
Net Cash used by Investing 40,963 - 30,963 25,963
Activities
CASH FLOWS FROM FINANCING
ACTIVITIES:
Additional paid in capital - - 114,848 142,781
Common stock - - 771 2,938
Net Cash used by Financing - - 115,619 145,719
Activities
NET INCREASE IN CASH (3,531) (9,193) (9,250) 11,657
CASH, BEGINNING OF PERIOD 15,188 - 20,907 -
CASH, END OF PERIOD
$ 11,657 $ (9,193) $ 11,657 $ 11,657
SUPPLEMENTAL INFORMATION:
Interest paid $ - $ - $ - $ -
Taxes paid $ - $ - $ - $ -
The accompanying independent accountants' report and the notes to
financial statements should be
read in conjunction with these Statements of Cash Flows.
PAGE-9-
BLUE STAR COFFEE, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
NOTE 1 - ORGANIZATION AND PURPOSE
Blue Star Coffee, Inc. (a development stage company) was
incorporated in the state of Nevada on July 28, 2000. The
Company has been organized for the purpose of roasting and
selling specialty coffee beans for its retail drive-through
and wholesale customers. The Company also plans to sell
brewed coffee, expresso-based beverages such as cappuccinos,
lattes, mochas and expressos and various blended drinks
through company-owned retail locations and franchised retail
locations. In addition the Company plans to establish
wholesale accounts with businesses and restaurant chains. The
Company has had little revenue generating operations to date,
and therefore, in accordance to Statement on Financial
Accounting Standards No. 7, the Company is considered a
development stage company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
Blue Star Coffee, Inc.'s policy is to prepare its financial
statements on the accrual basis of accounting. The fiscal
year end is December 31.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with
maturities of three months or less when purchased.
Summary of Non-Cash Transactions
There were non-cash transactions which are discussed in Note 5
and 6.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense
during the reported period. Actual results could differ from
those estimates.
Income Taxes
Income taxes are generally provided for the tax effects of
transactions reported in the financial statements and consist
of taxes currently due plus deferred taxes related primarily
to differences between the basis of fixed assets for financial
and income tax reporting. The
PAGE-10-
BLUE STAR COFFEE, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Company has no tax deferred tax assets and liabilities
representing the future tax return consequences of those
differences because currently the Company has no material
temporary timing differences that give rise to these tax
assets and liabilities.
Fixed Assets
Fixed assets are stated at cost. Expenditures that materially
increase the life of the assets are capitalized. Ordinary
maintenance and repairs are charged to expense as incurred.
When assets are sold or otherwise disposed of, the cost and
the related accumulated depreciation and amortization are
removed from the accounts and any resulting gain or loss is
recognized at that time. Depreciation is computed primarily
on the straight-line method for financial statement purposes
over the following estimated useful lives:
Vehicles 5 Years
Office Equipment 5 Years
Office Fixtures 7 Years
and Furniture
Earnings Per Share Calculations
Earnings per share for any specific period end is calculated
by first determining the weighted average number of shares
that were outstanding for the period end. The net income
(loss) for that period end is then divided by the weighted
average number of shares outstanding for that period to arrive
at earnings per share.
Advertising
Advertising costs are to be expensed when incurred.
Advertising expenses from inception to September 30, 2001 are
$0.
NOTE 3 - MARKETABLE SECURITIES
Cost and fair value of marketable debt and equity securities
at September 30, 2001,
are as follows:
Available for Sale Securities September 30, 2001
----------------------------- ------------------
Equity securities:
Fair value $7,000
Total losses in accumulated 0
other comprehensive income
PAGE-11-
BLUE STAR COFFEE, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001
NOTE 3 - MARKETABLE SECURITIES (CONTINUED)
Net unrealized holding gains / losses on available-for-sale
securities in the amount of $0 for the nine months ended
September 30, 2001, have been included in accumulated other
comprehensive income.
NOTE 4 - STOCKHOLDER PAYABLE
A shareholder has loaned the company $25,470. This amount has
been determined to be payable within 12 months, therefore no
interest has been imputed.
A shareholder has loaned the company $2,000. This amount has
been determined to be payable within 12 months, therefore no
interest has been imputed.
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company paid one of its shareholders, Arrow Capital
Management $27,500 in full for services related to the
following activities; site search, marketing research and
management fees. The Company also paid Arrow Capital
Management an additional $18,500 for services relating to
marketing research, including demographic research.
The Company paid a related party, Newport Advisors $15,000 in
full for services related to consulting.
NOTE 6 - STOCKHOLDERS' EQUITY
Stock Issuances
A chronological history of Stockholders' Equity is as follows:
July 28, 2000 - The Company incorporated in Nevada. The
Company is authorized to issue 20,000,000 shares of its $0.001
par value common stock and 5,000,000 shares of its $0.001 par
value preferred stock.
July 29, 2000 - The Company issued 2,167,000 shares to the
three company founders as follows:
The Company issued to Ronald Davis 1,083,500 shares of
$0.001 par value common stock in exchange for cash in the
amount of $29,016. Of the total amount received, $1,084
is considered common stock and $27,933 is considered
additional paid-in capital.
The Company issued to Ronald Bringham 541,750 shares of
$0.001 par value common stock in exchange for cash in the
amount of $542 of which $542 is considered common stock
and there is no additional-paid-in-capital.
PAGE-12-
BLUE STAR COFFEE, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001
NOTE 6 - STOCKHOLDERS' EQUITY (CONTINUED)
The Company issued to Christopher Secreto 541,750 shares
of $0.001 par value common stock in exchange for cash in
the amount of $542 of which $542 is considered common
stock and there is no additional-paid-in-capital.
All of these shares were issued in accordance with Section
4(2) of the Securities Act of 1933.
July 29, 2000 - The Company issued 150,000 shares of $0.001
par value common stock to GoPublicToday, Inc. in exchange for
services (prepaid expenses) rendered in the amount of $22,500.
Of the total received, $150 is considered common stock and
$22,350 is considered additional paid-in capital. Shares
issued in accordance with Section 4(2) of the Securities Act
of 1933.
September 21, 2000 - The Company issued 100,000 shares of
$0.001 par value common stock to GoPublicToday, Inc. in
exchange for a non-interest baring balloon note totaling
$10,000, which was due and payable on March 21, 2001. Of the
total received, $100 is considered common stock and $9,900 is
considered additional paid-in capital. The note was extended
until September 21, 2001. Shares were issued in accordance
with Section 4(2) of the Securities Act of 1933.
September 21, 2000 - The Company issued 400,000 shares of
$0.001 par value common stock to Arrowhead Capital Management
in exchange for rights to services in the amount of $49,600.
Of the total received, $400 is considered common stock and
$49,200 is considered additional paid-in capital. Shares were
issued in accordance with Section 4(2) of the Securities Act
of 1933.
January 3, 2001 -- The State of Nevada issued a permit to the
Company to sell securities pursuant to the Company's
application for registration by qualification of an offering
of Common Stock in the state.
March 30, 2001 - The Company closed its offering pursuant to
Regulation D, Rule 504 of the 1933 Securities and Exchange
Act, as amended, whereby it sold a total of 770,787 shares of
its $0.001 par value common stock at $0.15 per share to
outside investors. Of the total number of shares, 770,787
shares were issued in exchange for cash in the amount of
$115,619, net of offering costs in the amount of $12,898 of
which $11,492 was commission and $1,406 was for related
expenses. Of the total cash received, $116 is considered
common stock and $115,503 is considered additional paid-in
capital. There have been no other issuances of common stock
or preferred stock. The Company sold all 770,787 shares of
its common stock to approximately 84 unaffiliated
shareholders, none of whom were/are officers.
March 31, 2001 - The Company had 3,587,787 shares of Common
issued and outstanding, held by 89 shareholders of record.
PAGE-13-
BLUE STAR COFFEE, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001
NOTE 6 - STOCKHOLDERS' EQUITY (CONTINUED)
On September 30, 2001, three shareholders were issued a total
of 1,500,000 shares as a bonus for previous service to the
company. These shares were issued at par ($0.001 per share).
Ron Davis received 1,000,000, valued at $1,000. Chris Secreto
received 250,000 shares, valued at $250. Ronald Bringham
received 250,000 shares, valued at $250.
On September 30, 2001, 505,000 shares of common stock and
100,000 shares of restricted stock were issued to two
shareholders in exchange for future services as follows:
The Company issued 275,000 shares of common stock and
50,000 shares of restricted stock to Scott Bleazard in
exchange for $68,800 of future services. Of the total
received, $325 is considered common stock and $68,475 is
considered additional paid-in capital. Shares were
issued in accordance with Regulation S-8 of the
Securities Act of 1933 and Section 4(2) of the Securities
Act of 1933, respectively.
The Company issued 230,000 shares of common stock and
50,000 shares of restricted stock to Stephen Brock in
exchange for $57,550 of future services. Of the total
received, $280 is considered common stock and $57,270 is
considered additional paid-in capital. Shares were
issued in accordance with Regulation S-8 of the
Securities Act of 1933 and Section 4(2) of the Securities
Act of 1933, respectively.
September 30, 2001 - The Company had 5,692,787 shares of
Common issued and outstanding, held by 89 shareholders of
record.
Stock Subscriptions
On September 21, 2000, the Company issued 100,000 shares in
exchange for a note receivable of $10,000. The amount has
been determined to be payable within 12 months, therefore no
interest has been imputed.
Certain stock-for-future services transactions have occurred
during the period from inception to March 31, 2001. These
future services consist of consulting fees to help the Company
develop a business plan and establish its organization and
infrastructure. On September 21, 2000, a stockholder
contributed $49,600 of rights to the future services in
exchange for stock. Another stockholder has promised to
provide future services valued at $22,500 in exchange for
150,000 shares of stock. All of the shares related to the
prepaid expenses have been issued to the stockholders as of
September 30, 2000 and are fully vested and non-forfeitable.
All of the services related to these stock subscriptions have
been performed and expensed.
The stock subscriptions of $126,350 consists of consulting
fees associated with future services to help the Company
maintain and develop its organization and infrastructure. All
of the shares related to the prepaid expenses have been issued
to the shareholders as of September 30, 2001 and are fully
vested and non-forfeitable.
PAGE-14-
BLUE STAR COFFEE, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001
NOTE 7 - GOING CONCERN
The Company's financial statements are prepared using the
generally accepted accounting principles applicable to a going
concern, which assumes the realization of assets and
liquidation of liabilities in the normal course of business.
However, the Company has no current source of revenue.
Without realization of additional capital, it would be
unlikely for the Company to continue as a going concern. It
is management's plan to seek additional capital through a 504
State Registered Offering. Management has also taken measures
to reduce expenses significantly.
NOTE 8 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any
additional shares of common stock that are not disclosed in
the equity section of the balance sheet.
PAGE-15-
Item 2. Management's Discussion and Plan of Operation
Forward-Looking Statements
This Quarterly Report contains forward-looking statements
about the Company's business, financial condition and prospects
that reflect management's assumptions and beliefs based on
information currently available. The Company can give no assurance
that the expectations indicated by such forward-looking statements
will be realized. If any of management's assumptions should prove
incorrect, or if any of the risks and uncertainties underlying such
expectations should materialize, Blue Star Coffee's actual results
may differ materially from those indicated by the forward-looking
statements.
The key factors that are not within the Company's control and
that may have a direct bearing on operating results include, but
are not limited to, acceptance of the Company's services, its
ability to expand its customer base, managements' ability to raise
capital in the future, the retention of key employees and changes
in the regulation of the Company's industry.
There may be other risks and circumstances that management may
be unable to predict. When used in this Quarterly Report, words
such as, "believes," "expects," "intends," "plans,"
"anticipates," "estimates" and similar expressions are intended to
identify forward-looking statements, as defined in Section 21E of
the Securities Exchange Act of 1934, although there may be certain
forward-looking statements not accompanied by such expressions.
The safe harbors of forward-looking statements provided by
Section 21E of the Exchange Act are unavailable to issuers not
subject to the reporting requirements set forth under Section 13(a)
or 15(d) of such same Act. As the Company has not registered its
securities pursuant to Section 12 of the Exchange Act, such safe
harbors set forth under the Reform Act are unavailable to the
Company.
General
Blue Star Coffee, Inc. is a developmental stage company that
seeks to build a chain of drive-through only specialty coffee
kiosks designed to serve the specialty coffee consumer in the
comfort of his or her automobile. Blue Star Coffee has no
intention of opening cafe-style shops, where customers would be
able to sit and linger at the location. The facilities from which
coffee will be sold will be freestanding structures designed to
accommodate two automobiles simultaneously, through a service
window on each side of the establishment. The Company's main focus
will be on developing company-owned and franchised retail drive-
through locations selling brewed coffee, espresso-based beverages
(such as cappuccinos, lattes, mochas and espressos), Italian sodas
and various blended drinks.
Management of the Company have prior experience with other
companies that have each operated stand-alone, drive-though only
coffee shops, in addition to operating sit-down, cafe-style shops,
as well as combination sit-down and drive-through stores. During
his tenure with Coffee People, Inc. in Oregon, Mr. Ronald Brigham,
COO of Blue Star Coffee, noted that of the 25 stores Coffee People
operated in the Portland area, two stores offered customers the
option of drive-through service and cafe-style accommodations and
seven stores were drive-through only. Mr. Brigham further
estimated that the drive-through locations each performed similarly
to the locations offering either sit-down only service or a
combination or sit down and drive-through services. He estimates
that the two combination inside-seating and drive-through stores
generated approximately 50% of revenues from drive-through
operations.
Drive-through coffee sales are in the infant stage, similar to
the experience of fast food restaurants' experimentation with drive-
through service in the 1960s. However, there are a negligible
number of existing drive-though only coffee shops to provide
sufficient data to demonstrate the performance of such stores'
operations. The Company has yet to generate revenues and faces
competition from all specialty coffee establishments. Many of the
Company's potential competitors have significantly greater
financial, technical and marketing resources than the Company does.
Competition may limit the Company's ability to generate sufficient
sales to meet its financial obligations and continue operations.
PAGE-16-
Results of Operations and Liquidity and Capital Resources
The Company has not generated any revenues since its inception
on July 28, 2000. For the quarter ended September 30, 2001,
expenses totaled $92,055, resulting in a net loss of $92,055.
Management anticipates that the Company will continue to incur net
losses for the next at least nine to 15 months.
To fund the build-out and initial marketing of it first drive-
through location, the Company anticipates that it will need to
raise additional working capital through a private or public
offering of equity or debt securities. As at September 30, 2001,
the Company has not recognized revenue and has accumulated a
deficit of approximately $236,686 since inception. Blue Star
Coffee's ability to continue as a going concern is contingent upon
attaining additional financing, for which there are no formal or
informal arrangements. While management of the Company is
expending their best efforts to achieve the above plans, there is
no assurance that any such activity will generate funds that will
be available for operations.
Continuing Operations
The Company has hereto set forth a timeline and estimated
budget. The Company cannot guarantee that it will be able to meet
such timeline and remain within its estimated costs. The Company
has obtained loans from shareholders totaling of $29,470 to sustain
operations temporarily.
The Company has issued stock for services, to preserve cash
for essential operations. On September 30, 2001, three
shareholders were issued a total of 1,500,000 shares as a bonus for
previous service to the company. Additionally on September 30,
2001, 505,000 shares of common stock and 100,000 shares of
restricted stock were issued to two shareholders in exchange for
future services. The Company believes the issuance of common stock
in lieu of cash allows management to reserve cash for necessary
expenditures, such as obtaining land use permits and developing its
first store.
However, if additional funding is not obtained, the Company
may be unable to pursue its goal of having its first store fully
operational by the start of the second quarter of 2002. If such
financing is realized, the Company must execute its plan of
operation on a timely basis, as well as assure that its suppliers
and contractors meet the same goals, otherwise the Company's
expected opening date will be delayed or its expected costs may be
elevated.
PAGE-17-
PART II - OTHER INFORMATION
Item 6. Exhibits
Exhibi Name and/or Identification of Exhibit
t
Number
3 Articles of Incorporation & By-Laws
(a) Articles of Incorporation of the Company filed
July 28, 2000. Incorporated by reference to the
exhibits to the Company's General Form For
Registration Of Securities Of Small Business Issuers
on Form 10-SB, previously filed with the Commission.
(b) By-Laws of the Company adopted August 2, 2000.
Incorporated by reference to the exhibits to the
Company's General Form For Registration Of
Securities Of Small Business Issuers on Form 10-SB,
previously filed with the Commission.
23 Consent of Experts and Counsel
Consents of independent public accountants
PAGE-18-
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Blue Star Coffee, Inc.
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-------------------------
(Registrant)
Date: November 13, 2001
By: /s/ Ronald A. Davis
Ronald A. Davis, President
PAGE-19-