10-Q 1 psgiform10q09302009acs.txt PSGIFORM10Q09302009 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2009 TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-32220 PRIME STAR GROUP, INC. (Exact name of small business issuer as specified in its charter) NEVADA 87-0636498 ================================================================================ (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) 650 OAKMONT AVENUE, UNIT 2110 LAS VEGAS NV 89109 (Address of principal executive offices) (702) 588-5965 (Issuer's telephone number) American Water Star, Inc. (Former Name) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the last 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 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [ ] No The number of shares of Common Stock, $0.001 par value, outstanding on September 30, 2009, was 52,716,078. Transitional Small Business Disclosure Format (check one): [ ] Yes [X] No 1 -------------------------------------------------------------------------------- INDEX ----- PART I FINANCIAL INFORMATION Page No. ITEM 1. FINANCIAL STATEMENTS Balance Sheets as of September 30, 2009 (unaudited) and December 31, 2008 1 (audited) Statement of Operations for the three and nine months ended September 30, 2 2009 and 2008 (unaudited) Statement of Cash Flows for the three months ended September 30, 2009 and 3 2008 (unaudited) Footnotes to the financial statements 4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OR OPERATION 14 ITEM 3. CONTROLS AND PROCEDURES 15 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 16 ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS 16 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 17 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 17 ITEM 5. OTHER INFORMATION--OFFICERS AND DIRECTORS, PSGI & SUBS 18 ITEM 6. EXHIBITS 19
PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PRIME STAR GROUP, INC. CONSOLIDATED BALANCE SHEETS Sept 30, December 31, 2009 2008 (Unaudited) (Audited) ============= ==================== ASSETS Current assets: Cash $ 6,033 $ Inventory 305,750 339,722- ==================== ==================== Total current assets 311,783 339,722- Machinery and equipment 1,133,846 1,133,846 Intangible assets - - ==================== ==================== Total assets 1,445,629 1,473,568- ==================== ==================== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable and accruals 4,229,571 4,229,565 Accrued compensation - chairman and majority stockholder 941,016 891,016 Advances from related parties 3,844,855 3,818,822 ==================== ==================== Total current liabilities 9,015,442 8,949,402 Stockholders' equity Preferred stock, $0.0001 par value, 25,000,000 shares - - authorized, no shares issued. Series A preferred convertible, 4,100,0000 shares - - authorized, no shares issued Common stock, $0.0001 par value, 125,000,000 shares authorized, 52,716,078and 1,368,529 shares issued and outstanding 4,481 137 Stock bought or for services not issued 720,000 and 720,000 shares 72 72 Common stock subscribed 10,000 10,000 Additional paid-in capital 40,368,703 39,265,196 Accumulated (deficit) (47,890,191) (46,751,239) ==================== ==================== (7,506,935) (8,949,402) ==================== ==================== $ 1,482,474 $ - ==================== ==================== SEE NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPT 30, 2009 2008 Sales $ - $ - Cost of sales - - ===================== ================== Gross profit - - Expenses: Depreciation and amortization - - General and administrative expenses 2,662,775.90 45,000 General and administrative expenses - 47,925 related party - 60,000 Loss due to impairment of equipment - - ===================== ================== Total cost and expenses 2,678,675.90 105,000 ===================== ================== Net operating (loss) (2,678,675.90) (105,000) ===================== ================== DISCONTINUED OPERATIONS Loss from Continued Operations Net loss $ (2,678,675.90) $ (105,000) ===================== ================== Loss per share from continuing operations $ - $ ===================== =============== Loss per share from discontinued operations $ (0.04) $ (0.08) ===================== =============== Total loss per share $ (0.04) $ (0.08) ===================== =============== Weighted average number of common shares outstanding - basic
SEE NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS PRIME STAR GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE 3 MONTHS ENDED FOR THE NINE MONTHS ENDED SEPT 30, 2009 SEPT 30, =================================== 2009 2008 ================ ================ Net loss from operations (352,350) $ (2,678,675.90) $ (105,000) Adjustments to reconcile net income to net cash provided by (used by) operations: Stock based compensation 326,317 2,566,870.90 Write-down of inventory 33,972 Changes in assets and liabilities: Accounts payable and accrued expenses 20,000 40,000 45,000- Accrued expenses - Related parties 6,033 37,833 60,000 ========= =============== =========== 0- 0-- 0.-- Net cash provided from operating activities - - Cash Flows from financing activities Net increase (decrease) in cash - Cash - ending ........... $ - $ - $ - =========== =============== ============ Supplemental disclosures: Interest paid ........... $ - $ - $ - =========== =============== ============ Income taxes paid ....... $ - $ - $ - =========== =============== ============
SEE NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS. 1. Significant Accounting Policies ---------------------------------- Nature of Business The Company was originally organized on June 1, 1999 as American Career Centers, Inc. On April 2, 2002 we amended our Articles of Incorporation to change our name to American Water Star, Inc. On April 11, 2008, the Company filed a Certificate of Amendment to Articles of Incorporation with the Nevada Secretary of State. The Amendment changed the Company's name to Prime Star Group, Inc.; reverse split the shares of the Company on a 1 for 100 basis, reauthorized the par value to $.0001 per share and increased the number of authorized shares to 125,000,000 common and 25,000,000 preferred shares. 2. Preparation of Financial Statements and Interim Presentation --------------------------------------------------------------- The Company follows the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America and has adopted a calendar year end of December 31. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company's system of internal accounting control is designed to assure, among other items, that (1) recorded transactions are valid; (2) valid transactions are recorded, and (3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented. During interim periods the Company follows the accounting policies set forth in its annual audited financial statements filed with the U.S. Securities and Exchange Commission on its Annual Report on Form 10-KSB for the year ended December 31, 2006. The information presented within these interim consolidated financial statements may not include all disclosures required by generally accepted accounting principles and the users of financial information provided for interim periods should refer to the annual financial information and footnotes when reviewing the interim financial results presented herein. In the opinion of management, the accompanying interim consolidated financial statements, prepared in accordance with the U.S. Securities and Exchange Commission's instructions for Form 10-QSB, are unaudited and contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations and cash flows of the Company for the respective interim periods presented. The current period results of operations are not necessarily indicative of results which ultimately will be reported for the full calendar year ending December 31, 2009. 3. Going Concern ---------------- The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the financial statements, during the periods ended Sept 30, 2009 and 2008, the Company incurred losses from discontinued operations of $2,678,675.90 and $105,000, respectively. The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern The Company has had no significant operations, assets, or liabilities since November 7, 2005, and accordingly, is fully dependent upon future sales of securities or upon its current management and / or advances or loans from significant or corporate officers to provide sufficient working capital to preserve the integrity of the corporate entity. Because of these factors, our auditors have issued an opinion for the Company which includes a statement describing our going concern status. This means, in our auditor's opinion, substantial doubt about our ability to continue as a going concern exists at the date of their opinion. The Company's continued existence is dependent upon its ability to generate sufficient cash flows from its planned business operations as well as to provide sufficient resources to retire existing liabilities and obligations on a timely basis. The Company anticipates offering future sales of equity securities. However, there is no assurance that the Company will be able to obtain funding through the sales of additional equity securities or, that such funding, if available will be obtained on terms favorable to or affordable by the Company. It is the intent of management and significant stockholders to provide sufficient working capital necessary to support and preserve the integrity of the corporate entity. However, no formal commitments or arrangements to advance or loan funds to the Company or repay any such advances or loans exist. There is no legal obligation for either management or significant stockholders to provide additional future funding. While the Company is of the opinion that good faith estimates of the Company's ability to secure additional capital in the future to reach our goals have been made, there is no guarantee that the Company will receive sufficient funding to sustain operations or implement any future business plan steps. 4. Related Party Transactions ----------------------------- At June 30, 2007 the Company has the following liabilities to its Chairman and major stockholder: Accrued $ 136,015 compensation Advances 306,255 5. Long-term Convertible Debt ----------------------------- None. 6. Commitments and Contingencies -------------------------------- Legal proceedings The Company is involved in various unresolved legal actions, administrative proceedings and claims in the ordinary course of business. Although it is not possible to predict with certainty the outcome of these unresolved actions, the Company believes these unresolved legal actions will not have a material effect on its financial position or results of operation. 7. New Accounting Standards --------------------------- In April 2009, the FASB issued FSP No. FAS 157-4, "Determining Fair Values When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly." This FSP provides guidance on (1) estimating the fair value of an asset or liability when the volume and level of activity for the asset or liability have significantly declined and (2) identifying transactions that are not orderly. The FSP also amends certain disclosure provisions of SFAS No. 157 to require, among other things, disclosures in interim periods of the inputs and valuation techniques used to measure fair value. This pronouncement is effective prospectively beginning April 1, 2009. The Company is evaluating the impact that the adoption of this standard will have on the Company's results of operations and financial condition. In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, "Recognition and Presentation of Other-Than-Temporary Impairments" (FSP 115-2). This FSP modifies the requirements for recognizing other-than-temporarily impaired debt securities and changes the existing impairment model for such securities. The FSP also requires additional disclosures for both annual and interim periods with respect to both debt and equity securities. Under the FSP, impairment of debt securities will be considered other-than-temporary if an entity (1) intends to sell the security, (2) more likely than not will be required to sell the security before recovering its cost, or (3) does not expect to recover the security's entire amortized cost basis (even if the entity does not intend to sell). The FSP further indicates that, depending on which of the above factor(s) causes the impairment to be considered other-than-temporary, (1) the entire shortfall of the security's fair value versus its amortized cost basis or (2) only the credit loss portion would be recognized in earnings while the remaining shortfall (if any) would be recorded in other comprehensive income. FSP 115-2 requires entities to initially apply the provisions of the standard to previously other-than-temporarily impaired debt securities existing as of the date of initial adoption by making a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The cumulative-effect adjustment potentially reclassifies the noncredit portion of a previously other-than-temporarily impaired debt security held as of the date of initial adoption from retained earnings to accumulated other comprehensive income. This pronouncement is effective April 1, 2009. The Company is evaluating the impact that the adoption of this standard will have on the Company's results of operations and financial condition. In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, "Interim Disclosures about Fair Value of Financial Instruments." This FSP essentially expands the disclosure about fair value of financial instruments that were previously required only annually to also be required for interim period reporting. In addition, the FSP requires certain additional disclosures regarding the methods and significant assumptions used to estimate the fair value of financial instruments. In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" ("SFAS 165") [ASC 855-10-05], which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 also requires entities to disclose the date through which subsequent events were evaluated as well as the rationale for why that date was selected. SFAS 165 is effective for interim and annual periods ending after June 15, 2009, and accordingly, the Company adopted this pronouncement during the second quarter of 2009. SFAS 165 requires that public entities evaluate subsequent events through the date that the financial statements are issued. The Company has looked at subsequent events through November 5, 2009 and has included all subsequent events in Note 14 - Subsequent Events. In June 2009, the FASB issued SFAS No. 166, "Accounting For Transfers of Financial Assets -- An Amendment Of FASB Statement No. 140" ("SFAS 166") [ASC860], which requires entities to provide more information regarding sales of securitized financial assets and similar transactions, particularly if the entity has continuing exposure to the risks related to transferred financial assets. SFAS 166 eliminates the concept of a "qualifying special-purpose entity", changes the requirements for derecognizing financial assets and requires additional disclosures. SFAS 166 is effective for fiscal years beginning after November 15, 2009. The Company has not completed its assessment of the impact SFAS 166 will have on its financial condition, results of operations or cash flows. In June 2009, the FASB issued SFAS No. 167, "Amendments to FASB Interpretation No. 46(R)" ("SFAS 167") [ASC 810-10], which modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. SFAS 167 clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity's purpose and design and a company's ability to direct the activities of the entity that most significantly impact the entity's economic performance. SFAS 167 requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity. SFAS 167 also requires additional disclosures about a company's involvement in variable interest entities and any significant changes in risk exposure due to that involvement. SFAS 167 is effective for fiscal years beginning after November 15, 2009. The Company has not completed its assessment of the impact SFAS 167 will have on its financial condition, results of operations or cash flows. In June 2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards Codification(TM) and the Heirarchy of Generally Accepted Accounting Principals - A Replacement of FASB Statement No. 162" ("SFAS 168"). This Standard establishes the FASB Accounting Standards Codification(TM) (the "Codification") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with US GAAP. The Codification does not change current US GAAP, but is intended to simplify user access to all authoritative US GAAP by providing all the authoritative literature related to a particular topic in one place. The Codification is effective for interim and annual periods ending after September 15, 2009, and as of the effective date, all existing accounting standard documents will be superseded. The Codification is effective in the third quarter of 2009. 8. Restatements --------------- The accompanying consolidated financial statements as of and for the nine months ended Sept 30, 2009 include the fix restated items from the previous six month period for the following items: Issuance of 938,400 shares of common stock for consulting services totaling $46,920 resulting in an increase in general and administrative expense by such amount and common stock by $94 and additional paid-in capital by $46,826; issuance of 13,796,200 shares of common stock for investor relations services totaling $689,810 resulting in an increase in general and administrative expense by such amount and common stock by $1,380 and additional paid-in capital by $688,430; and write-down of inventory by $33,972 resulting in an increase in general and administrative expense by such amount and decrease in inventory in the same amount. Overall effect on net loss totaled $770,702 to a restated net loss of $796,602 or $0.05 per share from a previously reported net loss of $25,900 or $0.015 per share for the period ending March 31, 2009. FORWARD-LOOKING STATEMENTS This document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words "may," "could," "estimate," "intend," "continue," "believe," "expect" or "anticipate" or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement. Although we believe the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to: o Our current deficiency in working capital; o Our ability to comply with SEC reporting requirements; o Loss of our real and personal property as a result of foreclosure or sale of our assets by receiver; o Adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations; o Loss of customers or sales weakness; o Our ability to collect accounts receivable; o Inability to achieve future sales levels or other operating results; and o The unavailability of funds for capital expenditures. For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see "Factors That May Affect Our Results of Operation" in this document and "Risk Factors" in our Annual Report on Form 10-KSB for the year ended December 31, 2007. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION OVERVIEW AND OUTLOOK Prime Star Group, Inc. (formerly American Water Star, Inc.) was started as a company which developed, marketed, sold, and distributed bottled water with four branded beverages: Hawaiian Tropic, Geyser Fruit, Geyser Sport, and Geyser Fruta. The products were orientated to the health conscious consumer looking for an alternative to products containing high sugar and caffeine levels. Our customers included single and multi-store retail operations, governmental agencies, and distributors who in turn sell to retail stores, convenience stores, schools and other outlets. In addition, we branched into the private label and co-packing industries in the fourth quarter of 2004. We initially sold our products exclusively through distributors who then supplied our products to retailers. Although we continued to use distributors, we also expanded our sales effort through sales directly to retailers. We had hoped the private label and co-packaging of beverages for other corporations would allows us to avoid costly marketing expenses that would otherwise be associated with brand development, launch, and continuing promotions. We anticipated the distribution of our sales over the next couple of years to be approximately 50% to 60% on private labeling. We have signed distribution agreements with Vintners' Private Reserve, Hemp C Iced Tea and P/R Private Reserve to exclusively distribute their Trademarked Products. Our Wild Grill Foods, Inc. wholly owned subsidiary has begun production and shipment of product orders, as of October 1, 2009. CURRENT OPERATIONS We had no revenues for either the three months ended Sept 30, 2009 and 2008 or the nine months ended Sept 30, 2009 and 2008. For the three months and nine months ended Sept 30, 2009, we incurred general and administrative expenses of $352,350 and 2,677,146.20 respectively and related party expenses of $6,033 and 37,833 respectively for a total of $358,383 and $2,678,675.90 respectively. This compares with general and administrative expenses of $125,000 and related party expenses of $60,000 for the corresponding period of the prior year. As a result of the foregoing, the company had a loss for the three months ended Sept. 30, 2009 of 358,383 and nine months of 2,678,675.90 compared to a no loss for the three months ended Sept., 2008 and $105,000 for the nine months ended Sept. 30, 2008. The Company has expended much of its time and efforts on research, development and procuring production facilities to begin production of its existing brand lines as well as introducing several new and vibrant products for our drink and specialty food divisions. LIQUIDITY AND CAPITAL RESOURCES The following table summarizes total current assets, liabilities and working capital at Sept. 30, 2009 compared to December 31, 2008. Sept. 30, 2009 December 31, INCREASE / (DECREASE) 2008 ========================================================================== $ % ========================================================================== Current Assets $311,783 $339,722 ($27,939) 9.11% ========================================================================== Current Liabilities $9,015,442 $8,949,402 66,040 .07% ========================================================================== Working Capital Deficit $8,703,659 $8,609,680 $93,979 1.09% ==========================================================================
As of Sept 30, 2009, we had a working deficit of $8,703,659 compared to working deficit of $8,609,960 as of December 31, 2008. As of Sept 30, 2009, we had $6,033 cash on hand, 311,783 of assets and a working capital deficiency of $8,703,659. OFF-BALANCE SHEET ARRANGEMENTS We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. GOING CONCERN The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the financial statements, during the periods ended Sept. 30, 2009 and 2008, the Company incurred losses from discontinued operations of $2,678,675.90 and $105,000, respectively. The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. It is the intent of management and significant stockholders to provide sufficient working capital necessary to support and preserve the integrity of the corporate entity. However, no form commitments or arrangements to advance or loan funds to the Company or repay any such advances or loans exist. However, there is no legal obligation for either management or significant stockholders to provide additional future funding. ITEM 3. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods. As of the date of this filing, Roger Mohlman, our Chief Executive Officer and Principal Financial Officer, of evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15. Based upon his evaluation, Mr. Mohlman concluded that as of September 30, 2006, our disclosure controls and procedures were not effective in timely alerting him to material information required to be included in our periodic Securities and Exchange Commission filings at the reasonable assurance level due to the material weaknesses described below. In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure our consolidated financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the consolidated financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented. A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies, which result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following two material weaknesses, which have caused management to conclude that, as of September 30, 2006, our disclosure controls and procedures were not effective at the reasonable assurance level: 1. We were unable to meet our requirements to timely file our Form 10-QSB for the period ended September 30, 2005; our Form 10-KSB for the year ended December 31, 2005; our quarterly reports on Form 10-QSB for the periods ended March 31, 2006, June 30, 2006 and September 30, 2006; our Form 10-KSB for the year ended December 31, 2006; and our Form 10-QSB for the periods ended March 31, 2007 and June 30, 2007 and and the Form 10-Q June 30, 2009 was filed one day late. Management evaluated the impact of our inability to timely file periodic reports with the Securities and Exchange Commission on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted in the inability to timely make these filings represented a material weakness. 2. We did not maintain a sufficient complement of finance and accounting personnel with adequate depth and skill in the application of generally accepted accounting principles as demonstrated by significant adjustments to our financial statements identified by our independent registered accounting firm in the preparation of this quarterly report. In addition, we did not maintain a sufficient complement of finance and accounting personnel to handle the matters necessary to timely file our Form 10-KSB for the year ended December 31, 2005 and our Forms 10-QSB for the three months ended March 31, 2006, the six months ended June 30, 2006 and the nine months ended September 30, 2006, or the Form 10-KSB for year ended December 31, 2006, or the Form 10-QSB for the three months ended March 31, 2007 or the six month ended June 30, 2007 or the form 10-KSB for year ended December 31, 2007, quarter ended March 31, 2008 and quarter ended June 30, 2008. Management evaluated the impact of our lack of sufficient finance and accounting personnel on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted in our lack of sufficient personnel represented a material weakness. REMEDIATION OF MATERIAL WEAKNESSES To remediate the material weaknesses in our disclosure controls and procedures identified above, we are being assisted by outside accounting personnel. We do not believe that this outsourcing will be effective once we commence significant operations. As a result, our internal controls may continue to be inadequate or ineffective, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision. However, we believe, once funding is available and have established criteria by which we will retain the expertise required to provide adequate and effective financial reporting. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING Except as noted above, there were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART II--OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is involved in various unresolved legal actions, administrative proceedings and claims in the ordinary course of business. Although it is not possible to predict with certainty the outcome of these unresolved actions, the Company believes these unresolved legal actions will not have a material effect on its financial position or results of operation. ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS During the 3 month period ending Sept. 30, 2009, the Company issued 7,365,000 shares of common stock for consulting and investor relations services totaling $368,250. ITEM 3. DEFAULTS BY THE COMPANY UPON ITS SENIOR SECURITIES None for this two year period. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None for this quarter. ITEM 5. SUBSEQUENT EVENTS REVENUES: The Company has revenues that began generating, through two of its wholly owned subsidiaries, the first week of October, 2009. ITEM 6. EXHIBITS INCORPORATED BY REFERENCE ================================================= EXHIBIT EXHIBIT DESCRIPTION FILED HEREWITH FORM PERIOD EXHIBIT FILING DATE ENDING ================================================================================================================ 3(i)(a) Articles of Incorporation 10-KSB 12/31/99 3.1 04/13/00 3(i)(b) Certificate of Amendment to the 10-KSB 12/31/99 3.2 04/13/00 Articles of Incorporation 3(i)(d) Certificate of Amendment to the 10-QSB 03/31/02 3.4 05/20/02 Articles of Incorporation 3(ii)(a) Bylaws of the Company 10-KSB 12/31/99 3.3 04/13/00 4.1 Certificate of Change in Number of S-8 4.3 04/05/02 Authorized Shares 4.2 Certificate of Designation Series A S-8 4.4 04/05/02 Convertible Preferred Stock 4.3 Amended Stock Plan 10-QSB 09/30/04 4.1 11/19/04 4.4 Securities Purchase Agreement with 8-K 4.1 11/04/04 Laurus Master Fund, Ltd. 4.5 Registration Rights Agreement with 8-K 4.2 11/04/04 Laurus Master Fund, Ltd. 4.6 Master Security Agreement with Laurus 8-K 4.3 11/04/04 Master Fund, Ltd. 4.7 Subsidiary Agreement between All-Star 8-K 4.4 11/04/04 Beverages and Laurus Master Fund, Ltd. 10.1 Employment Agreement with Roger 10-KSB 12/31/02 10.4 04/16/03 Mohlman 10.2 Trademark and Design License 10-KSB 12/31/02 10.6 04/16/03 Agreement for use of Hawaiian Tropic name 10.3 Employment Agreement with Daniel 8-K 10 05/19/05 Beckett 10.4 Forbearance Agreement with Laurus 8-K 10.1 08/10/05 Master Fund, Ltd. 10.5 Secured Convertible Note with Laurus 8-K 10.2 08/10/05 Master Fund, Ltd. 10.6 Master Security Agreement with Laurus 8-K 10.3 08/10/05 Master Fund, Ltd. 10.7 Subsidiary Guarantee with Laurus 8-K 10.4 08/10/05 Master Fund, Ltd 10.8 Deed of Trust, Assignments of Rents, 8-K 10.5 08/10/05 Security Agreement and Fixture Filing for the benefit of Laurus Master Fund 20.1 Notice of Trustee's Sale 8-K 10.1 12/29/05 20.2 Copy of the Statement of Breach or 8-K 10.2 12/29/05 Non-Performance and Notice of Election to Sell 31 Certification of Roger Mohlman Chief X Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act 32 Certification of Roger Mohlman, Chief X Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act
20 -------------------------------------------------------------------------------- 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. PRIME STAR GROUP, INC. (REGISTRANT) Date: November 12, 2009 By: /s/ Roger Mohlman ================================================================================ Roger Mohlman Chief Executive Officer Principal Financial Officer and Principal Accounting Officer EXHIBIT 31 CERTIFICATION I, Roger Mohlman, certify that: 1. I have reviewed this quarterly report on Form 10-Q of PRIME STAR GROUP, INC. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reports as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors of the small business issuer's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: November 12, 2009 /s/ Roger Mohlman ____________________________ Roger Mohlman Chief Executive Officer and Principal Accounting Officer EXHIBIT 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Prime Star Group, Inc .. (the "Company") on Form 10-Q for the period ended June 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Roger Mohlman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Roger Mohlman Roger Mohlman, Chief Executive Officer and Principal Accounting Officer November 12, 2009