Quest Resource Holding Corp - Quarter Report: 2009 December (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
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þ
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT
OF 1934
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For
the quarterly period ended December 31, 2009
or
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the transition period from
to
Commission File Number:
333-152959
BLUESTAR
FINANCIAL GROUP, INC.
(Exact
name of registrant as specified in its charter)
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NEVADA
(State
or other jurisdiction of
Incorporation
or organization)
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51-0665952
(I.R.S.
Employer
Identification
No.)
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11445
E. Via Linda, Suite 2419
Scottsdale,
AZ 85259
(Address, including zip code, of
principal executive offices)
(480) 463-4246
(Registrant’s
telephone number, including area code)
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 þ No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o No o
1
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
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Large
accelerated filer
o
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Accelerated
filer
o
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Non-accelerated
filer
o
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Smaller
reporting company
þ
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|||
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(Do
not check if a smaller reporting company)
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Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes þ No o
The total
number of shares of common stock outstanding as of January 31, 2010, was
12,400,000.
2
BLUESTAR
FINANCIAL GROUP, INC.
FORM
10-Q
INDEX
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3
PART
I - FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
4
BLUESTAR
FINANCIAL GROUP, INC.
(A
DEVELOPMENT STAGE COMPANY)
Unaudited
Financial Statements
For the
Three and Six Months Ended December 31, 2009 and 2008, and the
Period of
July 12, 2002 (Inception) to December 31, 2009
BLUESTAR
FINANCIAL GROUP, INC.
(A
DEVELOPMENT STAGE COMPANY)
Unaudited
Financial Statements
For the
Three and Six Months Ended December 31, 2009 and 2008, and the
Period of
July 12, 2002 (Inception) to December 31, 2009
TABLE
OF CONTENTS
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Page(s)
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Balance
Sheets as of December 31 and June 30, 2009
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F-1
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Statements
of Operations for the three and six months ended December 31,
2009 and 2008 and the period of July 12, 2002 (inception) to December 31,
2009
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F-2
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Statements
of Cash Flows for the six months ended December 31, 2009 and 2008 and the
period of July 12, 2002 (inception) to December 31, 2009
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F-3
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Notes
to Unaudited Financial Statements
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F-4
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BLUESTAR
FINANCIAL GROUP, INC.
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||||||||
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(A
Development Stage Company)
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||||||||
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Balance
Sheets
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||||||||
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December
31, 2009
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June
30, 2009
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|||||||
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(unaudited)
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||||||||
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ASSETS
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||||||||
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Current
assets
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||||||||
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Cash
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$ | 3 | $ | 3 | ||||
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Due
from consultant
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15,000 | 15,250 | ||||||
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Notes
receivable
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87,299 | 94,520 | ||||||
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Total
current assets
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102,302 | 109,773 | ||||||
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Total
assets
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$ | 102,302 | $ | 109,773 | ||||
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LIABILITIES
AND STOCKHOLDERS' EQUITY
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||||||||
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Current
liabilities
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||||||||
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Accounts
payable
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1,390 | 250 | ||||||
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Related
party payables
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15,400 | 13,900 | ||||||
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Total
current liabilities
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16,790 | 14,150 | ||||||
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Stockholders'
Equity
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||||||||
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Common
stock, $.001 par value; 60,000,000 shares authorized, 12,405,000 shares
issued and outstanding
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12,405 | 12,405 | ||||||
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Additional
paid in capital
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144,995 | 144,995 | ||||||
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Deficit
accumulated during the development stage
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(71,888 | ) | (61,777 | ) | ||||
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Total
stockholders' equity
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85,512 | 95,623 | ||||||
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Total
liabilities and stockholders' equity
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$ | 102,302 | $ | 109,773 | ||||
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See
accompanying notes to financial statements
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F-1
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BLUESTAR
FINANCIAL GROUP, INC.
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(A
Development Stage Company)
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||||||||||||||||||||
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Statement
of Operations (unaudited)
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||||||||||||||||||||
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For
the period from July 12, 2002 (inception) to December 31,
2009
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||||||||||||||||||||
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Three
months ended December 31,
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Six
months ended December 31,
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|||||||||||||||||||
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2009
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2008
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2009
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2008
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|||||||||||||||||
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Revenue
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$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
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Expenses
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||||||||||||||||||||
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Professional
fees
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7,088 | 600 | 10,111 | 1,200 | 71,736 | |||||||||||||||
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Other
general and administrative
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- | - | 152 | |||||||||||||||||
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Total
expenses
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7,088 | 600 | 10,111 | 1,200 | 71,888 | |||||||||||||||
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Net
loss
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$ | (7,088 | ) | $ | (600 | ) | $ | (10,111 | ) | $ | (1,200 | ) | $ | (71,888 | ) | |||||
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Basic
and diluted loss per common share
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$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||||||
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Weighted
average shares outstanding
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12,405,000 | 7,400,000 | 12,405,000 | 7,400,000 | ||||||||||||||||
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See
accompanying notes to financial statements
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F-2
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BLUESTAR
FINANCIAL GROUP, INC.
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(A
Development Stage Company)
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Statements
of Cash Flows (unaudited)
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||||||||||||
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For
the period from July 12, 2002 (inception) to December 31,
2009
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Six
months ended December 31,
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||||||||||||
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2009
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2008
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Cash
flows from operating activities
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Net
loss
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$ | (10,111 | ) | $ | (1,200 | ) | $ | (71,888 | ) | |||
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Adjustments
to reconcile net loss to net cash used in operating
activities
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||||||||||||
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Common
stock issued for services
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- | - | 2,400 | |||||||||
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Changes
in operating assets and liabilities
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||||||||||||
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Prepaid
expenses
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- | 1,200 | - | |||||||||
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Due
from consultant
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250 | - | (15,000 | ) | ||||||||
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Accounts
payable
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1,140 | - | 1,390 | |||||||||
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Net
cash used in operating activities
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(8,721 | ) | - | (83,098 | ) | |||||||
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Cash
flows from investing activities
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Notes
receivable
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7,221 | - | (87,299 | ) | ||||||||
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Net
cash used in investing activities
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7,221 | - | (87,299 | ) | ||||||||
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Cash
flows from financing activities
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Proceeds
from related party payables
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1,500 | - | 15,400 | |||||||||
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Proceeds
from sale of stock
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- | - | 155,000 | |||||||||
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Net
cash provided by financing activities
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1,500 | - | 170,400 | |||||||||
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Net
change in cash
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- | - | 3 | |||||||||
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Cash
at beginning of period
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3 | 500 | - | |||||||||
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Cash
at end of period
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$ | 3 | 500 | $ | 3 | |||||||
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Supplemental
disclosure of non-cash investing and financing activities:
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Issuance
of 5,000,000 shares of common stock for professional and consulting
services
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$ | - | $ | - | $ | 2,400 | ||||||
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Supplemental
Cash Flow Information:
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||||||||||||
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Cash
paid for interest
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$ | - | $ | - | $ | - | ||||||
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Cash
paid for income taxes
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$ | - | $ | - | $ | - | ||||||
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See
accompanying notes to financial statements
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F-3
BLUESTAR
FINANCIAL GROUP, INC.
(A
Development Stage Company
Notes
to the Unaudited Financial Statements
For
the Three and Six Months Ended December 31, 2009 and 2008 and the
Period
of July 12, 2002 (Inception) to December 31, 2009
NOTE 1 -
CONDENSED FINANCIAL STATEMENTS
The
accompanying financial statements have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows as of and for the periods ended
December 31, 2009 and for all periods presented have been made.
Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. It is suggested that
these condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's June 30, 2009 audited
financial statements as reported in Form 10-K. The results of
operations for the period ended December 31, 2009 are not necessarily indicative
of the operating results for the full year ended June 30, 2010.
NOTE 2 -
GOING CONCERN
The
Company's financial statements are prepared using accounting principles
generally accepted in the United States of America applicable to a going
concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has not yet
established an ongoing source of revenues sufficient to cover its operating
costs and allow it to continue as a going concern. The ability of the
Company to continue as a going concern is dependent on the Company obtaining
adequate capital to fund operating losses until it becomes
profitable. If the Company is unable to obtain adequate capital, it
could be forced to cease operations.
In order
to continue as a going concern, the Company will need, among other things,
additional capital resources. Management's plans to obtain such
resources for the Company include (1) obtaining capital from management and
significant stockholders sufficient to meet its minimal operating expenses, and
(2) as a last resort, seeking out and completing a merger with an existing
operating company. However, management cannot provide any assurances that the
Company will be successful in accomplishing any of its plans.
The
ability of the Company to continue as a going concern is dependent upon its
ability to successfully accomplish the plans described in the preceding
paragraph and eventually secure other sources of financing and attain profitable
operations. The accompanying financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going
concern.
NOTE 3 –
SUBSEQUENT EVENTS
The
Company has evaluated subsequent events from the balance sheet date through
February 10, 2010. On November 11, 2009, BSFG entered into an
agreement to acquire YouChange, Inc. and move toward a new business model in the
“Green Tech” sector. Management anticipates closing this transaction
by the end of the third quarter of Fiscal 2010.
F-4
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
SPECIAL
NOTE: This section
contains statements that constitute forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934 and
Section 27A of the Securities Act of 1933. The words “expect,” “estimate,”
“anticipate,” “predict,” “believe,” and similar expressions and variations
thereof are intended to identify forward-looking statements. Such
forward-looking statements include statements regarding, among other things,
(a) our estimates of raw material, (b) our projected sales and
profitability, (c) our growth strategies, (d) anticipated trends in
our industry, (e) our future financing plans, (f) our anticipated
needs for working capital and (g) the benefits related to ownership of our
common stock. This information may involve known and unknown risks,
uncertainties, and other factors that may cause our actual results, performance,
or achievements to be materially different from the future results, performance,
or achievements expressed or implied by any forward-looking statements for the
reasons, among others, described within the various sections of this Form
10-Q. In light of these risks and uncertainties, there can be no
assurance that the forward-looking statements contained in this Form 10-Q will
in fact occur as projected. We undertake no obligation to release publicly any
updated information about forward-looking statements to reflect events or
circumstances occurring after the date of this Form 10-Q or to reflect the
occurrence of unanticipated events. For a discussion of risk factors
affecting our business and prospects, see “Part II
—
Item 1A — Risk Factors.” This section should
be read in conjunction with “Part I — Item 1 — Financial
Statements.”
Overview
The
following discussion should be read in conjunction with the information
contained in the financial statements of BlueStar Financial Group (“BSFG”) and
the notes which form an integral part of the financial statements which are
attached hereto.
The
financial statements mentioned above have been prepared in conformity with
accounting principles generally accepted in the United States of America and are
stated in United States dollars.
Bluestar
Financial Group, Inc. was founded in 2002 as a development stage company,
focused on providing small ticket item leasing to small and middle market
companies primarily within the hospitality, spa, and resort communities. The
plan concentrated on leasing equipment, such as small computer systems, personal
computers, workstations, computer peripheral equipment, mainframe computers,
CAE/CAD/CAM equipment, energy equipment, general purpose plant/office equipment,
graphic processing equipment, audio/visual equipment, laundry items, and health
and spa equipment. With the economic downturn these targeted
industries were impacted hardest forcing the board of Bluestar Financial Group
to make a substantial change in strategy to enhance shareholder equity and
leverage the knowledge of the existing leasing business and network already
established.
After
careful consideration it became clear there could be great benefit to the
economic downturn resulting in the liquidation of non-performing leases and used
equipment available through our network. It was further concluded
that much of this excess equipment and used electronics from both small to
middle market companies and individual consumers was classified as “eWaste and
presented negative environmental impact. This problem was growing and
very few viable solutions have made it to market leaving a substantial void in
this highly visible and very anticipated “Green Tech” sector. It was
decided that to fully exploit and leverage this new market opportunity Bluestar
Financial Group would need to expand the board and management team and begin an
immediate search for a company with experience, relationships and leadership,
focused in this newly defined sector of “Green Tech.” The board was
successful in locating a company that had the attributes desired and on November
11, 2009 entered into a letter of intent to acquire YouChange,
Inc. Once this acquisition has been consummated it is anticipated
that the YouChange management team will take over, leading and executing this
new direction that will focus on the eWaste challenge by launching the
youchange.com platform that will include paying and providing reward points to
businesses and consumers for their used electronics, refurbishing and recycling
through established and certified strategic partners and generating revenue from
the sales and re-commerce of these products as well as licensing fees for
proprietary data.
5
On October 27, 2009,
Richard A. Papworth was appointed as Interim Chief Executive officer
and appointed to the board of directors. Jeffrey Rassas was appointed
Chairman of the board of directors. Mr. Papworth was hired
tofacilitate BSFG’s relocation from Richland, Washington to Scottsdale,
Arizona in preparation of rolling out the repositioned growth strategy focused
in the Green Tech sector to provide a solution to the ever growing environmental
challenges of e-Waste.
Plan
of Operation
As of the
end of December 31, 2009, we had $3 of cash on hand and receivables of
$102,000. We have accounts payable of $1,390 and notes payable of
$15,400. Over the next twelve months we estimate in order to maintain reporting
company status as defined under the ’34 Act we will require $15,000, expenses
include bookkeeping, accounting, and filing fees. We must raise cash
to cover these expenses and implement our business plan. We estimate
that we must raise a minimum of $25,000 in order to continue our proposed
business and maintain our status as a reporting company
The
Company’s ability to commence operations is entirely dependent upon the proceeds
to be raised. If BSFG does not raise at least $25,000, it will be
unable to establish a base of operations, without which it will be unable to
begin to generate any significant revenues in the future. If BSFG does not
produce sufficient cash flow to support its operations over the next 12 months,
the Company will need to raise additional capital by issuing capital stock in
exchange for cash in order to continue as a going concern. There are no formal
or informal agreements to attain such financing. BSFG cannot assure any
investor that, if needed, sufficient financing can be obtained or, if obtained,
that it will be on reasonable terms. Without realization of additional
capital, it would be unlikely for operations to continue and any investment made
by an investor would be lost in its entirety.
On August
12, 2008 the Company filed a registration statement on Form S-1, which was
deemed effective August 21, 2008 registering 5,000,000 shares to be sold to the
public at a price of $0.03 per share. As of the fourth quarter 2008
the offering was filled and total proceeds raised were
$150,000.
BSFG
management does not expect to incur research and development costs within the
next twelve months. BSFG currently does not own any significant plant or
equipment that it would seek to sell in the near future
The
Company has not paid for expenses on behalf of any director. Additionally,
BSFG believes that this policy shall not materially change within the next
twelve months.
Employees
BSFG
management does not anticipate the need to hire employees over the next twelve
months. Currently, the Company believes the services provided by its
officers and directors appears sufficient at this time. Our officers
and directors do not have an employment agreement with us. We presently do not
have pension, health, annuity, insurance, profit sharing or similar benefit
plans; however, we may adopt such plans in the future. There are presently no
benefits available to any employee. On October 27, 2009, Richard A.
Papworth was appointed as Interim Chief Executive officer and appointed to the
board of directors. Jeffrey Rassas was appointed Chairman of the
board of directors.
Investment
Policies
BSFG does
not have an investment policy at this time. Any excess funds it has
on hand will be deposited in interest bearing notes such as term deposits or
short term money instruments. There are no restrictions on what the directors
are able to invest or nor on additional funds held by
BSFG. Presently BSFG does not have any excess funds to
invest.
Since we
have had very minimal business activity, it is the opinion of management that
the most meaningful financial information relates primarily to current liquidity
and solvency. As at December 31, 2009, we had $3 cash on hand, notes
receivable of $87,300 and liabilities of $16,790.
6
The
Company will require cash injections of approximately $25,000 or collections in
that amount on its notes receivable to enable the Company to meet its
anticipated expenses over the next twelve months. Unless we raise additional
funds immediately, we will be faced with a working capital deficiency that may
result in the failure of our business, resulting in a complete loss of any
investment made into the Company. Our future financial success will
be dependent on the success of obtaining capital.
Our
financial statements contained herein have been prepared on a going concern
basis, which assumes that we will be able to realize our assets and discharge
our obligations in the normal course of business. We incurred a net loss for the
period from the inception of our business on July 12, 2002 to December 31, 2009
of $71,900. We did not earn any revenues during the aforementioned
period.
Critical
Accounting Policies
Our discussion and
analysis of its financial condition and results of operations, including the
discussion on liquidity and capital resources, are based upon our financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an ongoing basis, management re-evaluates
its estimates and judgments. The going concern basis of presentation
assumes we will continue in operation throughout the next fiscal year and into
the foreseeable future and will be able to realize our assets and discharge our
liabilities and commitments in the normal course of business. Certain
conditions, discussed below, currently exist which raise substantial doubt upon
the validity of this assumption. The financial statements do not include any
adjustments that might result from the outcome of the uncertainty.
Our
intended business activities are dependent upon our ability to obtain third
party financing in the form of debt and equity and ultimately to generate future
profitable business activity. As of September 30, 2009, we have not generated
revenues, and have experienced negative cash flow from minimal activities. We
may look to secure additional funds through future debt or equity financings.
Such financings may not be available or may not be available on BSFG
terms.
Recently
Issued Accounting Pronouncements
For
information on recently issued accounting pronouncements see the footnote
disclosure in Part II, Item 7
Trends
We are a
development stage business and have not generated any revenue and have no
prospects of generating any revenue in the foreseeable future. There
can be no guarantee or assurance that management will be successful in
developing the proposed business of the Company. Investors must be
aware that failure to do so would result in a complete loss of any investment
made into the Company
Limited
Operating History; Need for Additional Capital
There is
no historical financial information about us upon which to base an evaluation of
our performance as a business. We are a development stage company and have not
generated any revenues since our formation on July 12, 2002. We
require immediate additional capital in order to continue as a going
concern. If we are unable to secure approximately $25,000 of the
course of the next twelve months our business will fail and any investment made
into the Company would be lost in its entirety. We cannot guarantee
we will be successful in our business activities or in any activity that
management directs the business. Our business is subject to risks
inherent in the establishment of a new business enterprise, including limited
capital resources, and possible cost overruns due to price and cost increases in
services.
7
Results
of Operations – Since inception to December 31, 2009.
For the
period ended December 31, 2009, we had a net loss of $7,100 and an accumulated
loss since inception of $71,900. We have not generated any
revenue from operations since inception. Our accumulated loss from
our date of inception represents various expenses incurred with organizing the
company, undertaking audits, professional and consultant fees and general office
expenses.
Balance
Sheet as at June 30, 2009.
We ended
December 31, 2009 and Fiscal 2009 with $3 and $3 of cash, respectively, and
$102,300 and $109,800 in receivables, respectively. Accounts
receivable of $15,000 at the end of September 30, 2009 relates to the dispute
with Delos Stock Transfer--See
Part I, Item 3—Legal Proceedings. We ended December 31, 2009
and Fiscal 2009 with $16,800 and $14,200 in payables,
respectively. Total shares issued outstanding, as at the end of
Fiscal 2009, were 12,400,000.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MAKET
RISK
We
believe that there have been no significant changes in our market risk exposures
for the three months ended September 30, 2009.
ITEM
4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure
Controls and Procedures
Based on
their evaluation as of December 31, 2009, our Chief Executive Officer and
Principal Accounting Officer has concluded that our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended) were effective at a reasonable assurance level
to ensure that
the
information required to be disclosed by us in this quarterly report on Form 10-Q
was (i) recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and regulations and (ii) accumulated and
communicated to our management, being Chief Executive Officer and Chief
Accounting Officer, to allow timely decisions regarding required
disclosure.
ITEM
4T. CONTROLS AND PROCEDURES
(b) Changes in Internal
Controls
There
were no changes in our internal control over financial reporting during the
quarter ended December 31, 2009 that have materially affected, or
are likely to materially affect our internal control over financial
reporting. Our management, being Chief Executive Officer and Chief
Financial Officer, does not expect that our disclosure controls and procedures
or our internal controls over financial reporting will prevent all error and all
fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, will be
detected.
8
PART
11 – OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
There are
no legal proceedings to which BSFG is a party or is subject. There is
a currently a dispute between BSFG and Delos Stock Transfer
(“DST”). DST provided the escrow account and acted as escrow agent
for the investor funds relating to the recent registered offering completed by
BSFG. BSFG believes DST misappropriated approximately $15,000 from
this escrow account. BSFG is considering legal action against DST if
this dispute is not resolved in a timely manner.
ITEM
1A—RISK FACTORS
There are
many risk factors that affect our business and results of operations, some of
which are beyond our control. The following is a description of some of the
important risk factors that may cause our actual results in future periods to
differ substantially from those we currently expect or desire.
BlueStar’s
auditor has substantial doubts as to BlueStar’s ability to continue as a going
concern. Our auditor's report on our June 30, 2009 financial
statements expresses an opinion that substantial doubt exists as to whether we
can continue as an ongoing business. Because our officer may be unable or
unwilling to loan or advance any capital to BlueStar we believe that if we do
not raise at least $25,000, we may be required to suspend or cease the
implementation of our business plans within twelve (12) months. See “June 30, 2009 Audited Financial
Statements - Auditors Report" in Part II, Item 8.
Because
the Company has been issued an opinion by its auditors that substantial doubt
exists as to whether the company can continue as a going concern, it may be more
difficult for the company to attract investors. BlueStar incurred a $71,900 loss
for the period from inception to December 31, 2009 and we have no revenue. Our
future is dependent upon our ability to obtain financing and upon future
profitable operations from the sale of our products. We plan to seek additional
funds through private placements of our common stock. Our financial statements
do not include any adjustments relating to the recoverability and classification
of recorded assets, or the amounts of and classification of liabilities that
might be necessary in the event we cannot continue in existence.
We have no
independent operating history upon which to assess our prospects or ability to
be successful in the future. We are a development stage company with no
operating history, and our prospects and ability to compete in the industry must
be considered in light of the risks, expenses and difficulties frequently
encountered with any new business. Though we were incorporated in 2002, there
has been no business conducted in the Company until only recently. Our lack of
operating history will make it difficult for investors to assess the quality of
our management and our ability to operate profitably. We cannot
assure you that we will be able to implement our business strategies, that any
of our strategies will be achieved or that we will be able to operate
profitably.
We will need
additional capital to finance our growth, and we may not be able to obtain it on
acceptable terms, or at all, which may limit our ability to grow and compete
in the
leasing market. We will require
additional financing to expand our business through the acquisition of
additional equipment. Financing may not be available to us or may be
available to us only on terms that are not favorable. The terms of most
credit facilities offered to competitors in the equipment leasing industry
generally restrict a company’s ability to incur additional debt. We can expect
that the terms of any indebtedness we may incur may restrict our ability to
incur additional debt. If we are unable to raise additional funds or obtain
capital on acceptable terms, we may have to delay, modify or abandon some or all
of our growth strategies and we will fail.
Because
management does not have any technical experience in the leasing sector, our
business has a high risk of failure. While management has
training and experience in project estimating, cost accounting, retail store
openings, personnel management and the compliance issues surrounding public
entities, management does not have technical training in leasing. As a result,
we may not be able to recognize and take advantage of opportunities in the
leasing sector without the aid of consultants.
9
Also,
with no direct training or experience, our management may not be fully aware of
the specific requirements related to working in the leasing industry.
Management’s decisions and choices may not be well thought out and our
operations, earnings and ultimate financial success may suffer irreparable harm
as a result.
We will need to
re-lease or sell equipment as leases expire to continue to generate sufficient
funds to meet our obligations, finance our growth and operations and pay
dividends. We may not be able to re-lease or sell equipment on favorable terms,
or at all. Our business strategy entails the need to re-lease
equipment as current leases expire to generate sufficient revenues to meet
obligations and finance growth and operations. The ability to re-lease equipment
will depend on general market and competitive conditions. Some of our
competitors may have greater access to financial resources and may have greater
operational flexibility. If we are not able to re-lease equipment or to do so on
favorable terms, we may be required to attempt to sell the equipment to provide
funds for debt service or operating expenses. Our ability to re-lease or sell
equipment on favorable terms or without significant off-lease time could be
adversely affected by depressed conditions in the hospitality and resort
industry and equipment industries, bankruptcies, the effects of terrorism and
war, the sale of other equipment by financial institutions or other
factors.
Lease defaults
could result in significant expenses and loss of revenues. If
we are unable to agree upon acceptable terms for a lease restructuring, then we
have the right to repossess equipment and to exercise other remedies upon a
lessee default. However, repossession after a lessee default, typically result
in greater costs than those incurred when equipment is returned at the end of a
lease. These costs include legal expenses that could be significant,
particularly if the lessee is contesting the proceedings or is in bankruptcy.
Delays resulting from repossession proceedings also would increase the period of
time during which, the equipment does not generate rental revenue. In addition,
we may incur substantial maintenance, refurbishment or repair costs that a
defaulting lessee has failed to pay and that are necessary to put the equipment
in a condition suitable for re-lease or sale, and we may need to pay off liens
on the equipment to obtain clear possession and to remarket the asset
effectively.
Our lessees'
inability to fund their maintenance requirements on our equipment could
significantly harm our revenues, cash flows and ability to pay
dividends. The standards of maintenance observed by our
lessees and the condition of equipment at the time of sale or lease may affect
the values and rental rates of our equipment. Under each of our leases, the
lessee is primarily responsible for maintaining the equipment. A lessee’s
failure to perform required maintenance during the term of a lease could result
in a diminution in the value of an equipment, an inability to lease the
equipment at favorable rates or at all and would likely require us to incur
maintenance costs upon the expiration or earlier termination of the lease to
restore the equipment to an acceptable condition prior to sale or
re-leasing.
Our lessees may
have inadequate insurance coverage or fail to fulfill their respective indemnity
obligations, which could result in us not being covered for claims asserted
against us and may negatively affect our business, financial condition and
results of operations. Although we
do not expect to control the operation of our leased equipment, our ownership of
the equipment could give rise, in some jurisdictions, to strict liability for
losses resulting from their operation. Our lessees will be required to indemnify
us for, and insure against, liabilities arising out of the use and operation of
the equipment, including third-party claims for death or injury to persons and
damage to property for which we may be deemed liable. Lessees are also required
to maintain public liability, property damage risks insurance on the equipment
at agreed upon levels.
We cannot
assure you that the insurance maintained by our lessees will be sufficient to
cover all types of claims that may be asserted against us. Any inadequate
insurance coverage or default by lessees in fulfilling their indemnification or
insurance obligations, as well as the lack of available insurance, could reduce
the proceeds upon an event of loss and could subject us to uninsured
liabilities, either of which could adversely affect our business, financial
condition and results of operations.
Competitors with
more resources may force us out of business. The leasing
industry is highly competitive. Many Company competitors are significantly
larger and have substantially greater financial, marketing and other resources
and have achieved public recognition for their services.
10
Competition
by existing and future competitors could result in an inability to secure
adequate consumer relationships sufficient enough to support Company endeavors.
BlueStar cannot be assured that it will be able to compete successfully against
present or future competitors or that the competitive pressure it may face will
not force it to cease operations.
The company has
not identified any equipment or lessees thus an investor cannot assess all the
risks of investment. The Company has not
identified any equipment or lessees. An investor cannot assess
all of the otential risks of an investment in the Company because all of the
equipment to be purchased and the lessees to whom the equipment will be leased
have not been identified. A prospective investor will not have
complete information as to the manufacturers of the company’s equipment, the
number of leases to be entered into, the specific types and models of equipment
to be acquired, or the identity, financial condition and creditworthiness of the
companies who will lease our equipment. Investors must rely upon the
judgment and ability of our officer and director in his selection of equipment
to purchase, the evaluation of equipment manufacturers, the selection of lessees
and the negotiation of leases.
The market price
and trading volume of our shares may be volatile and may be affected by market
conditions beyond our control. The market price of our shares
may be highly volatile and could be subject to wide fluctuations. If the market
price of the shares declines significantly, investors may be unable to resell
shares at or above the purchase price, if at all. The Company cannot
assure
that the
market price of the shares will not fluctuate or decline significantly in the
future. In the past, the stock market has experienced extreme price
and volume fluctuations. These market fluctuations could result in extreme
volatility in the trading price of the shares, which could cause a decline in
the value of BlueStar shares. Price volatility may be greater when the public
float and trading volume of the shares is low.
If the Company
completes a financing through the sale of additional shares of its common stock
in the future, then shareholders will experience dilution. The most likely source
of future financing presently available to the Company is through the sale of
shares of its common stock. Any sale of common stock will result in
dilution of equity ownership to existing shareholders. This means that, if the
Company sells shares of our common stock, more shares will be outstanding and
each existing shareholder will own a smaller percentage of the shares then
outstanding. To raise additional capital the Company may have to issue
additional shares, which may substantially dilute the interests of existing
shareholders. Alternatively, the Company may have to borrow large sums, and
assume debt obligations that require it to make substantial interest and capital
payments.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE
OF
PROCEEDS
There has
been no change in our securities since the fiscal year ended June 30,
2009.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There
have been no matters brought forth to the securities holders to vote upon during
this quarter.
ITEM
5. OTHER INFORMATION
None
11
ITEM
6. EXHIBITS
(a) (3) Exhibits
The
following exhibits are included as part of this report by
reference:
|
3.1
|
Articles
of Incorporation (incorporated by reference from BSFG’s Registration
Statement on Form S-1 filed on August 12, 2008, Registration No.
333-152959)
|
|
|
3.2
|
By-laws
(incorporated by reference from BSFG’s Registration Statement on Form S-1
filed on August 21, 2008 Registration No. 333-152959)
|
|
|
31.1
|
8650
SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL
OFFICER
|
|
32.1
|
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
|
12
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, thereunto
duly authorized.
|
BLUESTAR
FINANCIAL GROUP, INC.
|
||||
|
Date:
February 16, 2010
|
By:
|
/s/ Richard A.
Papworth
|
||
|
Richard
A. Papworth
|
||||
|
Chief
Executive Officer
(Principal
Executive Officer and Principal Accounting Officer)
|
||||
13