**UNITED
STATES**


**SECURITIES
AND EXCHANGE COMMISSION**


**Washington,
D.C. 20549**





**Form
10-KSB**


(Mark
One)





x
    ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





**For
the fiscal year ended September 30, 2004**





o
    TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
transition period from _______________ to _______________.








**Commission
file number: 000-08835**





**Bluestar
Health, Inc.**


(Name of
small business issuer in its charter)





**Colorado**
      (State
      or other jurisdiction of
      incorporation
      or organization)
    **84-0736215**
      (I.R.S.
      Employer
      Identification
      No.)****
      **19901
      Southwest Freeway, Suite 209**
      **Sugar
      Land, TX**
      (Address
      of principal executive offices)
    ****
      **77479**
      (Zip
      Code)





**Issuer’s
telephone number (281) 207-5485**





Securities
registered under Section 12(g) of the Exchange Act:





**Common
stock, par value $0.001**


(Title of
class)





Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.    
Yes x No  
o .





Check if
there is no disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.   x





State
issuer’s revenues for its most recent fiscal year.  The
issuer had revenues of $302,349 for the year ended September 30,
2004.





State the
aggregate market value of voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked prices of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in rule
12b-2 of the Exchange Act.) $724,999 as of February 15, 2005.





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date. As of February 15, 2005, there were
13,365,784 shares of common stock, par value $0.001, issued and
outstanding.





**DOCUMENTS
INCORPORATED BY REFERENCE**





If the
following documents are incorporated by reference, briefly describe them and
identify the part of the form 10-KSB (e.g., Part I, Part II, etc.) into which
the document is incorporated: (1) any annual report to security holders; (2) any
proxy or information statement; and (3) any prospectus filed pursuant to rule
424(b) or (c) of the Securities Act of 1933 (“Securities Act”). The listed
documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990).
None.





Transitional
Small Business Disclosure Format (check one):





Yes o  No  
x





**Bluestar
Health, Inc.**





**TABLE
OF CONTENTS**




PART
      I
    1ITEM
      1 - DESCRIPTION OF BUSINESS
    1ITEM
      2 - DESCRIPTION OF PROPERTY
    5ITEM
      3 - LEGAL PROCEEDINGS
    5ITEM
      4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    6PART
      II
    7ITEM
      5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
    MATTERS
    7ITEM
      6 - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
    OPERATION
    9ITEM
      7 - FINANCIAL STATEMENTS
    13ITEM
      8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE
    14ITEM
      8A - DISCLOSURE CONTROLS AND PROCEDURES
    15ITEM
      8B - OTHER INFORMATION
    15PART
      III
    16ITEM
      9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
      COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
    16ITEM
      10 - EXECUTIVE COMPENSATION
    17ITEM
      11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
      RELATED STOCKHOLDER MATTERS
    18ITEM
      12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    20ITEM
      13 - EXHIBITS
    20ITEM
      14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
    21










**PART
I**


This
Annual Report includes forward-looking statements within the meaning of the
Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based
on management's beliefs and assumptions, and on information currently available
to management. Forward-looking statements include the information concerning our
possible or assumed future results of operations set forth under the heading
“Management's Discussion and Analysis of Financial Condition or Plan of
Operation.” Forward-looking statements also include statements in which words
such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,”
“consider” or similar expressions are used.





Forward-looking
statements are not guarantees of future performance. They involve risks,
uncertainties and assumptions. Our future results and shareholder values may
differ materially from those expressed in these forward-looking statements.
Readers are cautioned not to put undue reliance on any forward-looking
statements.





**ITEM
1 - DESCRIPTION OF BUSINESS**





**Business
Development**





We were
incorporated on April 26, 1977 as Taurus Oil Corporation. We have changed our
name several times to reflect changes in our business, most recently on August
12, 2004, when we changed our name from Taurus Entertainment Companies, Inc. to
Bluestar Health, Inc.





On June
12, 2003, we entered into a Stock Exchange Agreement with Alfred Oglesby, our
current sole officer and director, whereby Oglesby exchanged all of his stock in
Bluestar Physical Therapy, Inc., a Texas corporation, for 9,650,000 shares of
our common stock, representing 94.5% of our outstanding common stock at the
time. Bluestar became our wholly-owned subsidiary.





On
November 5, 2003, we entered into an asset purchase agreement for all of the
assets used to operate a physical therapy and rehabilitation clinic in Florida.
However, on August 24, 2004, as a result of a series of material breaches of the
acquisition agreement by the seller, we rescinded the acquisition in its
entirety.





On June
16, 2004, we acquired all of the assets used to operate two physical therapy and
rehabilitation clinics in Jackson, Mississippi. These two clinics constitute our
only operating business at this time.





Our
common stock is currently quoted on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc. (“NASDAQ OTCBB”) under the symbol
BLSH.





**Business
of Issuer**





*Overview*





We are a
healthcare management company with operations in the areas of physical therapy
and preventative care. We operate through one subsidiary, PT Centers, Inc. We
current own and operate two outpatient physical therapy and rehabilitation
clinics in Jackson, Mississippi.




1


We intend
to grow our business by acquiring additional physical therapy and outpatient
clinics and then integrating health prevention treatments and programs into the
clinics in order to create a healthcare services model based on preventing
illness. The focus will be on preventative care, rather than the more
traditional treatment of illness after it has developed.





*Principal
Products and Services and Their Markets*





Our
principal service is outpatient physical therapy treatments, primarily for
patients following an injury, surgery, or other event. These services include
pre- and post-operative orthopedic, spinal, occupational, and sports-related
injuries.





We intend
to expand the existing service offerings of our existing clinics, as well as
additional clinics we will be acquiring, to include specialized sports training
and medical spa treatments, which we anticipate will provide a bridge between
traditional physical therapy and preventative care.





Our
preventative care services, which are not currently operational in our existing
clinics, is anticipated to include wellness screening, healthy living programs,
and cosmetic treatments. Wellness screening will include health interviews,
laboratory tests, and diagnostic tests designed by measure the wellness of
patients. Healthy living programs will encompass fitness, personal training,
nutrition, weight management, hormone therapy, and nutritional supplement advice
and stress therapy treatments, all with the goal of helping patients to stay
healthier, feel better, have more energy, sleep sounder, and live longer.





Our
cosmetic treatments will include both non-operative and operative treatments
designed to help the patients feel better because they look better. These
treatments may be provided by third-party providers in conjunction with our
other service offerings.





The
market for our physical therapy services are patients recovering from a medical
event. The market for our services is driven primarily by the baby-boomer
generation who want to feel better, look better, and live longer by taking
affirmative action rather than be reactive to traditional medical
treatments.





*Distribution*





All of
our services are currently offered through our two clinics in Jackson,
Mississippi. Currently, we only offer physical therapy services. As we expand
our preventative care services and cosmetic treatments, these services will also
be offered through our various clinic locations.





*Competition*





The
healthcare industry generally, and the physical and occupational therapy
businesses in particular, are highly competitive and undergo continual changes
in the manner in which services are delivered and in which providers are
selected. Competitive factors affecting our business include quality of care,
cost, treatment outcomes, convenience of location, and relationships with and
ability to meet the needs of referral and payor sources. Our clinics compete
directly or indirectly with the physical and occupational therapy departments of
acute care hospitals, physician-owned therapy clinics, other private therapy
clinics and chiropractors.




2


Of these
sources, we believe acute care hospital outpatient therapy clinics and private
therapy clinic organizations are our primary competitors. We will face more
intense competition as consolidation of the therapy industry continues through
the acquisition of physician-owned and other privately-owned therapy
practices.





Our
strategy of integrating prevention, wellness and medical spa services to our
clinics will provide us with a competitive advantage over our competition. We
believe outpatient physical therapy practices are the perfect setting to
integrate these new services and we are already seeing the professional
organizations in rehabilitation embracing this challenge and
opportunity.





*Suppliers*





We do not
purchase goods or services in material amounts from any particular
suppliers.





*Customers*





Our
customers are individual patients in need of physical therapy treatments
following an injury, surgery, or other event. Our customers are usually referred
to us by their primary care physician.





*Intellectual
Property*





We have
no registered trademarks or service marks.





*Government
Approvals and Regulations*





There are
number of federal, state and local regulations that govern healthcare services.
Some states into which we may expand have laws requiring facilities employing
health professionals and providing health-related services to be licensed and,
in some cases, to obtain a certificate of need (that is, demonstrating to a
state regulatory authority the need for and financial feasibility of new
facilities or the commencement of new healthcare services). Based on our
operating experience to date, we believe that our business as presently
conducted does not require certificates of need or other facility approvals or
licenses. Our therapists, however, are required to be licensed. Failure to
obtain or maintain any required certificates, approvals or licenses could have a
material adverse effect on our business, financial condition and results of
operations.





Regulations
Controlling Fraud and Abuse. Various federal and state laws regulate the
relationships between providers of healthcare services and physicians. These
laws include Section 1128B(b) of the Social Security Act (the “Fraud and Abuse
Law”), under which civil and criminal penalties can be imposed upon persons who
pay or receive remuneration in return for referrals of patients who are eligible
for reimbursement under the Medicare or Medicaid programs. We believe that our
billing procedures and business arrangements are in compliance with these
provisions. However, the provisions are broadly written and the full extent of
their application is not currently known. In 1991, the Office of the Inspector
General (“OIG”) of the United States Department of Health and Human Services
issued regulations describing compensation arrangements that fall within a “Safe
Harbor” and, therefore, are not viewed as illegal remuneration under the Fraud
and Abuse Law. Failure to fall within a Safe Harbor does not mean that the Fraud
and Abuse Law has been violated; however, the OIG has indicated that failure to
fall within a Safe Harbor may subject an arrangement to increased scrutiny. Our
business of managing physician-owned physical therapy facilities is regulated by
the Fraud and Abuse Law and falls outside the scope of the Safe Harbors.
Nonetheless, we believe that these arrangements comply with the Fraud and Abuse
Law, even though federal courts provide little guidance as to the application of
the Fraud and Abuse Law to these arrangements. If our management contracts are
held to violate the Fraud and Abuse Law, it could have a material adverse effect
on our business, financial condition and results of operations. In February
2000, the OIG issued a special fraud alert regarding the rental of space in
physician offices by persons or entities to which the physicians refer patients.
The Fraud and Abuse Law prohibits knowingly and willfully soliciting, receiving,
offering or paying anything of value to induce referrals of items or services
payable by a federal healthcare program. The OIG is concerned that in these
arrangements, rental payments may be disguised kickbacks to the
physician-landlords to induce referrals.


3


Stark II.
Provisions of the Omnibus Budget Reconciliation Act of 1993 (the “Stark Law”)
prohibits referrals by a physician for designated health services” to an entity
in which the physician or family member has an investment interest or other
financial relationship, with several exceptions. The Stark Law covers management
contracts with physician groups and any financial relationship between Bluestar
and referring physicians, including any financial transaction resulting from a
clinic acquisition. This law also prohibits billing for services rendered from a
prohibited referral Several states have enacted laws similar to the Stark Law,
but these state laws cover all patients (not just Medicare and Medicaid). Many
federal healthcare reform proposals in the past few years have expanded the
Stark Law to cover all patients as well. As with the Fraud and Abuse Law, we
consider the Stark Law in planning our clinics, marketing and other activities,
and believe that our operations are in compliance with applicable law. If we
fail to comply with the Stark Law our financial results and operations would be
adversely affected. Penalties for violation include denial of payment for the
services, significant civil monetary penalties, and exclusion from the Medicare
and Medicaid programs.





HIPAA. In
an effort to further combat healthcare fraud, Congress included several
anti-fraud measures in the Health Insurance Portability and Accountability Act
of 1996 (“HIPAA”). HIPAA created a source of funding for fraud control to
coordinate federal, state and local healthcare law enforcement programs, conduct
investigations, provide guidance to the healthcare industry concerning
fraudulent healthcare practices, and establish a national data bank to receive
and report final adverse actions. Additionally, HIPAA mandates the adoption of
standards regarding the exchange of electronic healthcare information in an
effort to ensure the privacy and security of patient information and standards
relating to the privacy of health information and security of electronic health
information. Compliance with the standards for the exchange of electronic
healthcare information were required as of October 16, 2003. Compliance with the
standards relating to privacy of protected health information were required as
of April 14, 2003. Finally, we must comply with HIPAA standards for the security
of electronic health information by April 21, 2005. Sanctions for failing to
comply with HIPAA include criminal penalties and civil sanctions. We cannot
predict what effect, if any, the expanded enforcement authorities will have on
our business. We believe that our operations comply with HIPAA
requirements.





Other
Regulatory Factors. As political, economic and regulatory influences are
fundamentally changing the healthcare industry in the United States, Congress,
state legislatures and the private sector will continue to review and assess
alternative healthcare delivery and payment systems. Potential alternative
approaches include mandated basic healthcare benefits, controls on healthcare
spending through limitations on the growth of private health insurance premiums
and Medicare and Medicaid spending, the creation of large insurance purchasing
groups, and price controls. Legislative debate is expected to continue in the
future and market forces are expected to demand reduced costs. We cannot predict
what impact the adoption of any federal or state healthcare reform measures or
future private sector reform may have on our business.


4


*Research
and Development*





We have
not spent any material amount of time or money on research and development, and
do not anticipate doing so in the future.





*Employees*





We
currently have three employees at the corporate level, including our sole
officer and director, Alfred Oglesby. Our two clinics employ an additional
eleven people, two of which are part-time employees.





**ITEM
2 - DESCRIPTION OF PROPERTY**





Our main
office is located in Sugar Land, Texas, where we lease approximately 500 square
feet of office space.





**ITEM
3 - LEGAL PROCEEDINGS**





In
November 2003, a lawsuit was filed by R. Dean Ayers against our subsidiary,
Bluestar Physical Therapy, Inc., alleging breach of contract in the amount of
$16,773.66. On January 27, 2005, we settled this dispute with Mr. Ayers for
$10,000 cash, 24,000 shares of our common stock, and the mutual execution of
general releases.





On August
27, 2004, Bluestar Physical Therapy, a Division of Bluestar Health Inc., filed
suit seeking rescission of the transaction by which Bluestar Physical Therapy
acquired HealthQuest Inc.  The suit alleges fraudulent inducement and first
material breach of the contract by HealthQuest and Dr. Peter Lord, the
President and Chief Executive Officer of HealthQuest, which rendered the
continued performance under the agreement impossible.  The suit is Cause
No. 2004-47308; *Bluestar
Physical Therapy, a Division of Bluestar Health Inc. v. HealthQuest Inc. and
Peter Lord* ; filed
in the 152 nd Judicial
District Court of Harris County, Texas.  Healthquest answered with a
general denial and discovery in the case is ongoing.





In the
ordinary course of business, we are from time to time involved in various
pending or threatened legal actions. The litigation process is inherently
uncertain and it is possible that the resolution of such matters might have a
material adverse effect upon our financial condition and/or results of
operations. However, in the opinion of our management, matters currently pending
or threatened against us are not expected to have a material adverse effect on
our financial position or results of operations.


5





**ITEM
4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**




The Board
of Directors of the Company called a properly noticed Special Meeting of
Shareholders on August 12, 2004. A quorum was present at the meeting and there
was one matter submitted to a vote. A majority of the shareholders voted and
approved the proposal as follows:




To
      approve an amendment to the Corporation’s Articles of Incorporation to (a)
      change the name of the Corporation to Bluestar Health, Inc., and (b)
      increase the Corporation’s authorized common stock from 20,000,000 to
      40,000,000 shares.





For9,650,000
    Against   
      0
    Abstain  
       0


6


**PART
II**





**ITEM
5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS**





Our
common stock is currently quoted on the NASDAQ OTCBB, under the symbol “BLSH”
and has traded under that symbol since August 20, 2004. Prior to August 20,
2004, our common stock was traded under the symbol “TAUR.” Our common stock is
only traded on a limited or sporadic basis and should not be deemed to
constitute an established public trading market. There is no assurance that
there will be liquidity in the common stock.





Below is
a table indicating the range of high and low bid price for the common stock for
each quarterly period within the most recent two fiscal years, as reported by
The NASDAQ Stock Market, Inc. The information reflects prices between dealers,
and does not include retail markup, markdown, or commission, and may not
represent actual transactions.





**Fiscal
      Year**
    
    
    
    **Prices****Ended**
      **September
      30,**
    
    **Period**
    
    **High**
    
    **Low**2003
    
    First
      Quarter
    
    $0.12
    
    $0.01Second
      Quarter
    
    $0.06
    
    $0.06Third
      Quarter
    
    $0.62
    
    $0.06Fourth
      Quarter
    
    $0.54
    
    $0.302004
    
    First
      Quarter
    
    $1.30
    
    $0.00Second
      Quarter
    
    $1.20
    
    $0.55Third
      Quarter
    
    $0.60
    
    $0.29Fourth
      Quarter
    
    $0.55
    
    $0.252005
    
    First
      Quarter
    
    $0.70
    
    $0.25Close
      on February 15, 2005
    
    
    
    $0.19





The
Securities Enforcement and Penny Stock Reform Act of 1990 requires additional
disclosure relating to the market for penny stocks in connection with trades in
any stock defined as a penny stock. The Commission has adopted regulations that
generally define a penny stock to be any equity security that has a market price
of less than $5.00 per share, subject to a few exceptions that we do not meet.
Unless an exception is available, the regulations require the delivery, prior to
any transaction involving a penny stock, of a disclosure schedule explaining the
penny stock market and the risks associated therewith.





**Holders**





As of
September 30, 2004 and February 15, 2005 there were 12,548,504 and 13,365,784
shares, respectively, of our common stock issued and outstanding and held by
approximately 1,385 holders of record.


7


**Dividend
Policy**





We have
not paid any dividends on our common stock and do not expect to do so in the
foreseeable future. We intend to apply our earnings, if any, in expanding our
operations and related activities. The payment of cash dividends in the future
will be at the discretion of the Board of Directors and will depend upon such
factors as earnings levels, capital requirements, our financial condition and
other factors deemed relevant by the Board of Directors.





**Securities
Authorized for Issuance Under Equity Compensation Plans**





We do not
have any equity compensation plans.





**Recent
Sales of Unregistered Securities**





There
have been no events that are required to be reported under this
Item.





**Purchases
of Equity Securities by the Small Business Issuer and Affiliated
Purchasers**





There
have been no events that are required to be reported under this
Item.


8


**ITEM
6 - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION**





**Overview**





We own
and operate licensed outpatient physical therapy clinics. We currently operate
two clinics which we acquired on June 16, 2004, and began operating shortly
thereafter. We intend to do additional acquisitions and hope to expand
nationwide. The one clinic we acquired as part of the Healthquest acquisition
was closed during the quarter ended June 30, 2004. Through the two operating
clinics we had revenues of $302,349 during the three months ended September 30,
2004.





The
clinics we acquire are intended to provide post-operative care and treatment for
a variety of orthopedic related disorders and sports-related injuries only on an
outpatient basis. Our growth strategy is to acquire and develop outpatient
physical therapy clinics initially in Texas and the South and later to expand on
a national basis.





For the
below comparisons of the fiscal year and fiscal quarter ended September 30, 2004
to the fiscal year and fiscal quarter ended September 20, 2003 and the fiscal
quarter ended June 30, 2004, we have backed out all amounts that were
attributable to the clinic we purchased from Healthquest, Inc., since we
rescinded that transaction. Therefore, a comparison of the financial statements
from the three months ended September 30, 2004, contained herein, is not
consistent with the financial statements included in our Form 10-QSBs for the
quarters ended March 31, 2004 and June 30, 2004, because the latter financial
statements included revenues and expenses attributable to the clinic we
purchased from Healthquest, Inc. We plan on restating our financial statements
for the quarters ended March 31, 2004 and June 30, 2004 to exclude the
Healthquest, Inc. clinic when we file our Form 10-QSBs for the second and third
quarters of our next fiscal year.





**Year
Ended September 30, 2004 Compared to the Period from Inception (March 18, 2003)
through September 30, 2003**





**Results
of Operations**





Introduction





We had
revenues of $302,349 for the year ended September 30, 2004, with all of the
revenues coming during the quarter ended September 30, 2004, and we did not have
any revenues for the period from inception (March 18, 2003) to September 30,
2003. All of our revenues are from the two operating clinics we acquired in June
2004 and began operating in August 2004.





Revenues,
Expenses and Loss from Operations





Our
revenues, general and administrative expenses, value of stock issued for
services, interest expense, and net loss for the year ended September 30, 2004,
as compared to the period from inception (March 18, 2003) through September 30,
2003, are as follows:


9





Year
      endedSeptember30,
      2004
    
    Inception(March
      18,2003)
      toSeptember30,
      2003
    
    PercentageChangeRevenues
    
    $
    302,349
    
    $
    -
    
    
    N/AGeneral
      and administrative
    
    
    451,654
    
    
    351,602
    
    
    28
    %Stock
      Issued for Services
    
    
    240,022
    
    
    225,300
    
    
    7
    %Interest
      expense
    
    
    (15,647
    )
    
    (6,900
    )
    
    127
    %Net
      loss
    
    
    (407,039
    )
    
    (583,802
    )
    
    (30
    %)





Revenues





Our
revenues were significantly higher this year when compared to last year due to
our acquisition and operation of the two clinics. Due to the fact the three
months ended September 30, 2004 was our first quarter operating the clinics our
revenues of $302,349 may not be indicative of the revenues from those two
clinics in future quarters. Additionally, we plan on locating additional clinics
to acquire in the future, which may also change our revenues in future quarter
and year periods.





General
and Administrative Expenses





Our
general and administrative expenses were 25% higher this year due to the
expenses involved in operating the clinics.





Stock
Issued for Services





Due to
our lack of operations and revenue for much of the year ended September 30,
2004, the value of the stock we issued for services was similar to the previous
year when we had no operations or revenue.





Interest
Expense





Our
interest expense is related to a note payable that dates back to the transaction
between us and Alfred Oglesby whereby Mr. Oglesby transferred his stock
ownership in Bluestar Physical Therapy, Inc, a Texas corporation for 94.5% of
our outstanding stock. Currently this note payable has repayment terms of 60
monthly payments of $1,500 beginning in October, 2004.





Net
Loss





Our net
loss decreased approximately 30% this year compared to last year. This decrease
in our net loss this year is primarily attributable to the revenues generated
from our operation of the clinics we acquired and began operating in the fourth
quarter of this year.





**Three
Months Ended September 30, 2004 Compared to the Three Months Ended September 30,
2003**




**Results
of Operations**




10


Introduction





For the
three months ended September 30, 2004, we had revenues of $302,349 and a net
loss of $(79,539). For the three months ended September 30, 2003, we did not
have any revenues and a net loss of $(289,925).





Revenues
and Net Loss





Our
revenues, general and administrative expenses, interest expense, and net loss
for the three months ended September 30, 2004, as compared to the three months
ended September 30, 2003 are as follows:





Three
      months endedJune 30, 2004
    
    Three
      months ended September 30, 2003
    
    PercentageChangeRevenues
    
    $
    302,349
    
    $
    0
    
    
    N/AGeneral
      and administrative
    
    
    133,654
    
    
    57,725
    
    
    132
    %Interest
      expense
    
    
    6,147
    
    
    6,900
    
    
    (11
    %)Net
      loss
    
    
    (79,539
    )
    
    (289,925
    )
    
    (73
    %)





Our
revenues of $302,349 for the three-month period ended September 30, 2004, were
significantly greater than our revenues for the same period one year ago.
However, due to the fact this quarter was our first quarter operating the two
clinics we do not know if this will be indicative of future quarters’ revenues.
Our general and administrative expenses were also significantly higher during
the most recent three month period when compared to the same period one year ago
($133,654 versus $57,725) due to the expenses involved in operating the clinics.
Again, since this was our first quarter operating the clinics we do not know if
the expenses for this quarter are indicative of future quarters. The interest
expense is primarily attributable to the note payable that was issued in the
transaction between Alfred Oglesby and the Company, whereby Alfred Oglesby
became our majority shareholder. Our net loss decreased significantly due to the
revenues generated by the two clinics.





**Liquidity
and Capital Resources**





Introduction





We have
not operated profitably, and do not anticipate doing so in the near future. We
did have operations in the fourth quarter that generated revenue; however, we
anticipate we will continue to seek to raise capital through a variety of
sources to fund operations until such time as we might operate on a positive
cash flow basis. To date, we have relied primarily on funds from our majority
stockholder, and anticipate continuing to do so until our operations increase
significantly or until we raise the necessary capital.




11


Our cash,
total current assets, total assets, total current liabilities, and total
liabilities as of September 30, 2004 and June 30, 2004 are as
follows:





September
      30, 2004
    
    June
      30, 2004
    
    ChangeCash
    
    $
    152,489
    
    $
    581
    
    
    151,908Total
      current assets
    
    
    250,336
    
    
    581
    
    
    249,755Total
      assets
    
    
    426,521
    
    
    41,828
    
    
    384,693Total
      current liabilities
    
    
    279,493
    
    
    769,607
    
    
    (490,114
    )Total
      liabilities
    
    
    356,760
    
    
    776,766
    
    
    (420,006
    )





Cash
Requirements





Currently,
our cash requirements consist primarily of general and administrative expenses
related to operating the two clinics, maintaining our status as a public
company, and certain debt payments that come due.





Sources
and Uses of Cash





*Operations*





We
generated $302,349 in revenues this quarter, mainly from the operation of our
two clinics. We anticipate we will continue to generate revenues from these two
clinics in future quarters, but we do not anticipate we will not be operating at
a positive cash flow in the near future.





*Financing*





Prior to
beginning to operate the two clinics we funded expenses primarily through
advances from our majority shareholder. Until we can raise additional capital
and/or increase the revenues from the clinics to get cash flow positive, we
anticipate we will continue to take advances from our majority shareholder to
fund our operations. We do not currently have any specific plans as to how we
will raise the necessary capital or increase the revenues from the
clinics.





Debt
Instruments, Guarantees, and Related Covenants





We have
two primary debt obligations. The first is two vehicle loans, and we are in
default on both of these loans. No demands have been made as of the date hereof.
Finally, the third obligation is a note to the controlling shareholder of Taurus
Entertainment Companies, Inc. arising out of the transaction whereby our current
majority shareholder obtained control. Under new revised terms for this note,
its new repayment terms are $1,500 per month for the next 60 months, beginning
in October, 2004.





**Critical
Accounting Policies**





The
discussion and analysis of the Company’s financial condition and results of
operations are based upon its consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses.




12


*Revenue
Recognition*





Our
revenue recognition policy is objective in that we recognize revenue when
services are performed. Accordingly, there are no estimates or assumptions that
have caused deviation from our revenue recognition policy.





*Accounting
for Stock-Based Compensation*





We
account for stock-based compensation based on the provisions of Accounting
Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” as
amended by the Financial Accounting Standards Board Interpretation No. 44,
“Accounting for Certain Transactions Involving Stock Compensation.” These rules
state that no compensation expense is recorded for stock options or other
stock-based awards to employees that are granted with an exercise price equal to
or above the estimated fair value per share of the company’s common stock on the
grant date. We adopted the disclosure requirements of Statement of Financial
Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” which
requires compensation expense to be disclosed based on the fair value of the
options granted at the date of the grant.





In
December 2002, the Financial Accounting Standards Board issued Statement No.
148, “Accounting for Stock-Based Compensation — Transition and Disclosure—an
amendment of Financial Accounting Standards Board Statement No. 123.” This
statement amends Statement of Financial Accounting Standards No. 123, to provide
alternative methods of transition for an entity that voluntarily changes to the
fair value based method of accounting for stock-based employee compensation. It
also amends the disclosure provisions of Statement of Financial Accounting
Standards No. 123 to require prominent disclosure about the effects on reported
net income of an entity’s accounting policy decisions with respect to
stock-based employee compensation. We did not voluntarily change to the fair
value based method of accounting for stock-based employee compensation;
therefore, the adoption of Statement of Financial Accounting Standards No. 148
did not have a material impact on our financial position.





**Off-balance
Sheet Arrangements**





We have
no off-balance sheet arrangements that 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 deemed by our management to be material to
investors.





13




**ITEM
7 - FINANCIAL STATEMENTS**


Index
      to Financial StatementsReport
      of Independent Certified Public Accountants
    F-1Balance
      Sheet as of September 30, 2004
    F-2Statement
      of Operations for the years ended September 30, 2004 and
    2003
    F-3Statement
      of Stockholders Equity for the years ended September 30, 2004 and
      2003
    F-4Statement
      of Cash Flows for the years ended September 30, 2004 and
    2003
    F-5Notes
      to Financial Statements
    F-6
      - F-11





**ITEM
8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE**





On August
20, 2004, Malone & Bailey, PLLC, CPA, the independent accountants previously
engaged as the principal accountants to audit the financial statements of the
Company, was dismissed.





Also
effective on August 20, 2004, the Company engaged Lopez, Blevins, Bork &
Associates, LLP, as its independent certified public accountants. The decision
to change accountants was approved by the Board of Directors of the
Company.





The audit
report of Malone & Bailey, PLLC on the Company’s financial statements as of
September 30, 2003 and for the period from March 18, 2003 (inception) through
September 30, 2003 (the “Audit Period”) did not contain any adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles, except the reports were modified to
include an explanatory paragraph wherein they expressed substantial doubt about
the Company’s ability to continue as a going concern. During the Audit Period,
and through August 20, 2004, there were no disagreements with Malone &
Bailey, PLLC on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of the former accountants, would have caused it
to make reference to the subject matter of the disagreements in connection with
its report, and there were no reportable events as described in Item
304(a)(1)(v) of Regulation S-K.





The
Company has provided a copy of this disclosure to Malone & Bailey, PLLC and
has requested that the former accountants furnish the Company with a letter
addressed to the Securities and Exchange Commission stating whether they agree
with the statements made by the Registrant, and, if not, stating the respects in
which they do not agree. A copy of the letter is attached hereto as Exhibit
16.1.





During
the two most recent fiscal years, or any subsequent interim period prior to
engaging Lopez, Blevins, Bork & Associates, LLP, neither the Company nor
anyone acting on the Company’s behalf consulted with Lopez, Blevins, Bork &
Associates, LLP regarding (i) the application of accounting principles to a
specific completed or contemplated transaction, or (ii) the type of audit
opinion that might be rendered on the Company’s financial statements where
either written or oral advice was provided that was an important factor
considered by the Company in reaching a decision as to the accounting, auditing,
or financial reporting issue, or (iii) any matter that was the subject of a
disagreement with the Company’s former accountant on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of the
former accountant, would have caused it to make reference to the subject matter
of the disagreements in connection with its audit report.





14




**ITEM
8A - CONTROLS AND PROCEDURES**


Our Chief
Executive Officer and Chief Financial Officer (or those persons performing
similar functions), after evaluating the effectiveness of 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) as of a date within 90 days of the
filing of this annual report (the “Evaluation Date”), have concluded that, as of
the Evaluation Date, our disclosure controls and procedures were effective to
ensure the timely collection, evaluation and disclosure of our information
relating to that would potentially be subject to disclosure under the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder. There were no significant changes in our internal controls or in
other factors that could significantly affect our internal controls subsequent
to the Evaluation Date.





**ITEM
8B - OTHER INFORMATION**





All
information required to be filed on a Form 8-K during the three months ended
September 30, 2004 was filed with the Commission on a Form 8-K. For a
description of our Form 8-Ks filed during this three month period see Item
13(b), below.


15


**PART
III**





**ITEM
9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT**





**Directors
and Executive Officers**





The
following table sets forth the names and ages of our directors and executive
officers as of February 15, 2005, the principal offices and positions held by
each person, and the date such person became a director or executive officer.
Our executive officers are elected annually by the Board of Directors. The
directors serve one-year terms until their successors are elected. The executive
officers serve terms of one year or until their death, resignation or removal by
the Board of Directors. Unless described below, there are no family
relationships among any of the directors and officers.





Name
    
    Age
    
    Position(s)Alfred
      Oglesby
    
    37
    
    President,
      CFO, CAO, Secretary, and Director





**Alfred
Oglesby** formed
Bluestar Physical Therapy, Inc. in March 2003. From 2000 through 2002, Mr.
Oglesby was an investor in several private physical therapy clinics in the
Southwest. From 1998 through 2000, Mr. Oglesby served as a Director and a
Registered Investment Advisor at Oglesby & Londergan, based in Houston,
Texas. From 1996 through 1998, Mr. Oglesby served as a Registered Investment
Advisor at Waddell & Reed Financial Services, based in Houston, Texas. Prior
to 1996, Mr. Oglesby played professional football for the Miami Dolphins and the
New York Jets of the National Football League ("NFL") where he became acquainted
with the benefits of physical therapy. Mr. Oglesby attended the University of
Houston and is a member of the University of Houston's Board of Directors. Mr.
Oglesby is also a member of the Board of Directors of the Urban
League.





**Compliance
with Section 16(a) of the Securities Exchange Act of 1934**





Section
16(a) of the Securities Exchange Act of 1934 requires the Company’s directors
and executive officers and persons who own more than ten percent of a registered
class of the Company’s equity securities to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than ten percent
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.





To the
Company’s knowledge, none of the required parties are delinquent in their 16(a)
filings.





**Board
Meetings and Committees**





During
the fiscal year ended September 30, 2004, the Board of Directors met on a weekly
basis and took written action on numerous other occasions. All the members of
the Board attended the meetings. The written actions were by unanimous
consent.


16


We
presently have no executive committee, nominating committee or audit committee
of the Board of Directors.





Code
of Ethics





We have
not adopted a written code of ethics, primarily because we believe and
understand that our officers and directors adhere to and follow ethical
standards without the necessity of a written policy.





**ITEM
10 - EXECUTIVE COMPENSATION**





The
Summary Compensation Table shows certain compensation information for services
rendered in all capacities for the fiscal years ended September 30, 2004 and
2003. Other than as set forth herein, no executive officer's salary and bonus
exceeded $100,000 in any of the applicable years. The following information
includes the dollar value of base salaries, bonus awards, the number of stock
options granted and certain other compensation, if any, whether paid or
deferred.





**Annual
      Compensation**
    
    **Long
      Term Compensation****Awards**
    
    **Payouts******
      **Name
      and**
      **Principal
      Position**
    ****
      ****
      **Year**
    ****
      **Salary**
      **($)**
    ****
      **Bonus**
      **($)**
    **Other
      Annual**
      **Compensation**
      **($)***
    
    **Restricted
      Stock**
      **Awards**
      **($)**
    **Securities
      Underlying Options SARs**
      **(#)**
    
    ****
      **LTIP
      Payouts**
      **($)**
    **All
      Other**
      **Compensation**
      **($)**Alfred
      Oglesby, Director, President, CFO CAO, and Secretary
    2004
    - 0
      -
    - 0
      -
    - 0
      -
    
    - 0
      -
    - 0
      -
    
    - 0
      -
    - 0
      -2003
    - 0
      -
    - 0
      -
    - 0
      -
    
    - 0
      -
    - 0
      -
    
    - 0
      -
    - 0
      -








**OPTION/SAR
      GRANTS IN LAST FISCAL YEAR**
      **(Individual
      Grants)****Name**
    **Number
      of Securities**
      **Underlying**
      **Options/SARs
      Granted**
      **(#)**
    **Percent
      of Total**
      **Options/SARs
      Granted**
      **to
      Employees In Fiscal**
      **Year**
    **Exercise
      or Base Price**
      **($/Sh)**
    **Expiration
      Date**Alfred
      Oglesby
    N/A
    N/A
    N/A
    N/A







**AGGREGATED
      OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR**
      **AND
      FY-END OPTION/SAR VALUES****Name**
    **Shares
      Acquired On**
      **Exercise**
      **(#)**
    **Value
      Realized**
      **($)**
    **Number
      of Unexercised**
      **Securities
      Underlying**
      **Options/SARs
      at FY-End**
      **(#)**
      **Exercisable/Unexercisable**
    **Value
      of Unexercised**
      **In-The-Money**
      **Option/SARs**
      **at
      FY-End**
      **($)**
      **Exercisable/Unexercisable**Alfred
      Oglesby
    N/A
    N/A
    N/A
    N/A




17


**2004
Non-Qualified Stock Grant and Option Plan**





On
September 29, 2004, our Board of Directors approved the Bluestar Health, Inc.
2004 Non-Qualified Stock Grant and Option Plan. The Plan offers selected
employees, directors, and consultants an opportunity to acquire our common
stock, and serves to encourage such persons to remain employed by us and to
attract new employees. The Plan allows for the award of stock and options, up to
1,200,000 shares of our common stock. As of September 30, 2004, no stock, or
options to acquire shares of our common stock, had been issued under the
Plan.





**Compensation
of Directors**





Our
director does not receive any compensation for serving as a
director.





**ITEM
11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS**





The
following table sets forth, as of February 15, 2005, certain information with
respect to the Company’s equity securities owned of record or beneficially by
(i) each Officer and Director of the Company; (ii) each person who owns
beneficially more than 5% of each class of the Company’s outstanding equity
securities; and (iii) all Directors and Executive Officers as a
group.





Common
      StockTitle
      of Class
    
    Name
      and Address of
      Beneficial
      Owner
    
    Amount
      andNature ofBeneficialOwnership
    
    Percent
      of
      Class (1)Common
      Stock
    
    Alfred
      Oglesby (2)(3)
    
    9,550,000
    
    71.0
      %Common
      Stock
    
    Frank
      Wiley
      c/o
      Alfred Oglesby
      19901
      Southwest Freeway, Suite 209
      Sugar
      Land, TX 77479
    
    950,000
    
    7.1%All
      Officers and Directors
      as
      a Group (1 Person)
    
    9,550,000
    
    71.0
      %





(1)
    Unless
      otherwise indicated, based on 13,365,784 shares of common stock
      outstanding. Shares of common stock subject to options or warrants
      currently exercisable, or exercisable within 60 days, are deemed
      outstanding for purposes of computing the percentage of the person holding
      such options or warrants, but are not deemed outstanding for purposes of
      computing the percentage of any other person.





(2)
    Unless
      otherwise indicated, the address of each director is c/o Taurus
      Entertainment Companies, Inc., 19901 Southwest Freeway, Suite 209, Sugar
      Land, Texas 77479.





(3)
    Indicates
      a Director of the Company.




18


The
issuer is not aware of any person who owns of record, or is known to own
beneficially, five percent or more of the outstanding securities of any class of
the issuer, other than as set forth above. The issuer is not aware of any person
who controls the issuer as specified in section 2(a)(1) of the Investment
Company Act of 1940. There are no classes of stock other than common stock
issued or outstanding. There are currently warrants outstanding to acquire
333,334 shares of our common stock at $0.15 per share, and other than as set
forth herein, there are no options, warrants, or other rights to acquire common
stock outstanding. The Company does not have an investment advisor.





There are
no current arrangements which will result in a change in
control.


19


**ITEM
12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**





There
have been no events that are required to be reported under this
Item.





**ITEM
13 - EXHIBITS**





**(a)**
    **Exhibits**





2.1
      (1)
    
    Asset
      Purchase Agreement dated March 9, 20042.2
      (1)
    
    Bill
      of Sale dated March 9, 20042.3
      (1)
    
    Assignment
      and Assumption Agreement3.1
      (2)
    
    Restated
      Articles of Incorporation of Taurus Petroleum, Inc.3.2
      (3)
    
    Articles
      of Amendment to the Articles of Incorporation of Taurus Petroleum,
      Inc.3.3
      (2)
    
    Bylaws
      of Taurus Oil Corporation4.1
      (4)
    
    2004
      Non-Qualified Stock Grant and Option Plan10.1
      (3)
    
    Consulting
      Agreement dated March 16, 2003 with Peter Wokoun10.2
      (3)
    
    Consulting
      Agreement dated March 24, 2004 with Elorian Landers10.3
      (3)
    
    Consulting
      Agreement dated March 24, 2004 with Rod Watkins10.4
      (1)
    
    Unsecured
      Subordinated Promissory Note dated June 14, 200431.1
    
    Rule
      13a-14(a)/15d-14(a) Certification of Chief Executive
    Officer31.2
    
    Rule
      13a-14(a)/15d-14(a) Certification of Chief Financial
    Officer32.1
    
    Chief
      Executive Officer Certification Pursuant to 18 USC, Section 1350, as
      Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
    
    Chief
      Financial Officer Certification Pursuant to 18 USC, Section 1350, as
      Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.





(1)
    Incorporated
      by reference from our Current Report on Form 8-K dated July 1, 2004 and
      filed with the Commission on July 2, 2004.





(2)
    Incorporated
      by reference from our Annual Report on Form 10-KSB for the year ended
      September 30, 1998, filed with the Commission on January 20,
      1999.





(3)
    Incorporated
      by reference from our Quarterly Report on Form 10-QSB for the quarter
      ended June 30, 2004, filed with the Commission on August 25,
      2004.





(4)
    Incorporated
      by reference from our Form S-8 Registration Statement dated September 29,
      2004 and filed with the Commission on October 1,
2004.





**(b)**
    **Reports
      on Form 8-K**




20


On July
2, 2004, we filed an Item 2 Current Report on Form 8-K dated June 16, 2004,
describing the acquisition of all of the assets of two businesses known as the
Mississippi Central Clinic and the Canton Rehabilitation Clinic by our
wholly-owned subsidiary, PT Centers, Inc.





On August
20, 2004, we filed an Item 4.01 Current Report on Form 8-K dated August 20,
2004, describing the engagement of Lopez, Blevins, Bork & Associates, LLP,
as our new independent certified public accountants.





On August
27, 2004, we filed an Item 2.01 Current Report dated August 24, 2004, on Form
8-K describing our Board of Directors election to rescind the acquisition of
Healthquest, Inc., in its entirety. The rescission was effective August 24,
2004.





On
September 30, 2004, we filed an Item 9.01 Current Report on Form 8-K/A dated
June 16, 2004, enclosing required financial statements concerning our
acquisition of two businesses known as the Mississippi Central Clinic and the
Canton Rehabilitation Clinic by our wholly-owned subsidiary, PT Centers, Inc.





**ITEM
14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES**





**Audit
Fees**





During
the fiscal years ended September 30, 2004 and 2003, Malone
& Bailey, PLLC, CPA billed
us $19,000 and $0, respectively, and Lopez,
Blevins, Bork & Associates, LLP billed us
$0 and $0, respectively, in fees for professional services for the audit of our
annual financial statements and review of financial statements included in our
Form 10-KSBs and Form 10-QSBs.





**Audit
- Related Fees**





During
the fiscal years ended September 30, 2004 and 2003, Malone
& Bailey, PLLC, CPA, and Lopez,
Blevins, Bork & Associates, LLP did not bill us any fees for assurance and related services related to the performance of the audit or review
of our financial statements.





**Tax
Fees**





During
the fiscal years ended September 30, 2004 and 2003, Malone
& Bailey, PLLC, CPA, and Lopez,
Blevins, Bork & Associates, LLP did not bill us any fees for professional services for tax planning and preparation.





**All
Other Fees**





During
the fiscal years ended September 30, 2004 and 2003, Malone & Bailey, PLLC,
CPA, and Lopez,
Blevins, Bork & Associates, LLP  did not
bill us for any other fees.





Of the
fees described above for the fiscal year ended September 30, 2004 and 2003, 100%
were approved by the Board of Directors of the Company as there was not an Audit
Committee in place at the time of the approvals.


21


**SIGNATURES**





In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





Bluestar
      Health, Inc.,a
      Colorado corporation/s/
      Alfred E. OglesbyBy:    
      Alfred E. OglesbyIts:    
      PresidentDate:
      February 18, 2005




In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.




/s/
      Alfred E. OglesbyBy:    
      Alfred E. OglesbyIts:    
      President, Chief Financial Officer, Chief Accounting Officer, Secretary,
      and DirectorDate:
      February 18, 2005




22


**BLUESTAR
HEALTH, INC.**


****





**Financial
Statements as of**


**September
30, 2004**


**And
Report of Independent Registered**


**Public
Accounting Firm**








**BLUESTAR
HEALTH, INC.**




**TABLE OF CONTENTS********Page**REPORT
      OF INDEPENDENT REGISTERED PUBLICACCOUNTING
      FIRM
    F-1FINANCIAL
      STATEMENTS:Balance
      Sheet at September 30, 2004
    F-2Statements
      of Operations for the years endedSeptember
      30, 2004 and 2003
    F-3Statements
      of Stockholders’ Deficit for theyears
      ended September 30, 2004 and 2003
    F-4Statements
      of Cash Flows for theyears
      ended September 30, 2004 and 2003
    F-5NOTES TO FINANCIAL
      STATEMENTS







**INDEPENDENT
AUDITOR’S REPORT**








To the
Stockholders and Board of Directors


Bluestar
Health Inc


Houston,
Texas





We have
audited the accompanying balance sheet of Bluestar Health, Inc. (Bluestar) as of
September 30, 2004, and the related statements of operations, stockholder’s
equity, and cash flows for the year ended September 30, 2004 and the period from
March 18, 2003 (inception) through September 30, 2003. These financial
statements are the responsibility of Bluestar’s management. Our responsibility
is to express an opinion on these financial statements based on our
audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Bluestar Health Inc. as of
September 30, 2004, and the results of its operations and its cash flows for the
year ended September 30, 2004 and the period March 18, 2003 (inception) through
September 30, 2003, in conformity with accounting principles generally accepted
in the United States of America.








LOPEZ,
BLEVINS, BORK & ASSOCIATES, L.L.P.





Houston,
Texas


February
17, 2005


F-1


*Bluestar Health, Inc.*


**


**BALANCE
SHEET**


**September
30, 2004**





**ASSETS****Current
      Assets:**Cash
    
    $
    155,989Accounts
      receivable, net of allowance of $0
    
    
    83,186Total
      current assets
    
    
    239,175**PROPERTY
      AND EQUIPMENT**,**net**
    
    
    39,185**GOODWILL**
    
    
    137,000Total
      assets
    
    $
    415,360**LIABILITIES
      AND SHAREHOLDERS’ EQUITY****CURRENT
      LIABILITIES:**Current
      maturities of long term debt
    
    $
    16,998Accounts
      payable
    
    
    61,792Accrued
      expenses
    
    
    43,234Advance
      from shareholder
    
    
    185,390Total
      current liabilities
    
    
    307,414**LONG
      TERM DEBT**
    
    
    68,069**TOTAL
      LIABILITIES**
    
    
    375,483**COMMITMENTS
      AND CONTINGENCIES****SHAREHOLDERS'
      EQUITY**Common
      stock, $.001 par value, 20,000,000 shares authorized,12,298,504
      shares issued and outstanding
    
    
    12,299Additional
      paid in capital
    
    
    1,018,419Accumulated
      deficit
    
    
    (990,841
    )Total
      shareholders’ equity
    
    
    39,877Total
      liabilities and shareholders’ equity
    
    $
    415,360




***See
accompanying summary of accounting policies and notes to financial
staements.***
 - F-2
-


***Bluestar Health, Inc.***


****


**STATEMENTS
OF OPERATIONS**


**Year
Ended September 30, 2004 and**


**Period
from March 18, 2003 through September 30, 2003**




2004
    
    2003Revenues
    
    $
    302,349
    
    $
    -Operating
      Expenses:GENERAL
      & ADMINISTRATIVE
    
    
    451,654
    
    
    351,602NON
      CASH STOCK FOR SERVICES
    
    
    240,022
    
    
    225,300DEPRECIATION
    
    
    2,065
    
    
    -693,741576,902OPERATION
      LOSS
    
    
    (391,392
    )
    
    (576,902
    )INTREST
      EXPENSE
    
    
    (15,647
    )
    
    (6,900
    )NET
      LOSS
    
    $
    (407,039
    )
    $
    (583,802
    )NET
      INCOME PER SHARE:Basic
      and diluted
    
    $
    (.04
    )
    $
    (.06
    )Weighted
      average shares outstanding**:**Basic
      and diluted
    
    
    11,170,531
    
    
    10,002,910




***See
accompanying summary of accounting policies and notes to financial
staements.***
 - F-3
-


*Bluestar Health, Inc.*




**STATEMENTS
OF STOCKHOLDER'S EQUITY**


**Year
Ended September 30, 2004 and**


**Period
from March 18, 2003 through September 30, 2003**




Common
      stock
    
    Additionalpaid
      in
      capital
    
    Accumulated
      Deficit
    
    TotalShares
    
    AmountIssuance
      of common stockto
      founder for cash
    
    
    9,650,000
    
    $
    9,650
    
    $
    151,245
    
    $
    -
    
    $
    160,895Issuance
      of stock in reversemerger
    
    
    558,004
    
    
    558
    
    
    (558
    )
    
    -
    
    
    -Issuance
      of common stock forservices
    
    
    500,000
    
    
    500
    
    
    224,800
    
    
    -
    
    
    225,300Net
      loss
    
    
    -
    
    
    -
    
    
    -
    
    
    (583,802
    )
    
    (583,802
    )Balance,September
      30, 2003
    
    
    10,708,004
    
    
    10,708
    
    
    375,487
    
    
    (583,802
    )
    
    (197,607
    )Issuance
      of common stock foracquisitions
    
    
    1,150,000
    
    
    1,150
    
    
    378,350
    
    
    
    
    
    379,500Issuance
      of common stock forservices
    
    
    378,000
    
    
    378
    
    
    239,644
    
    
    
    
    
    240,023Issuance
      of common stock forcash
    
    
    62,500
    
    
    63
    
    
    24,938
    
    
    
    
    
    25,000Net
      loss
    
    
    -
    
    
    -
    
    
    -
    
    
    (407,039
    )
    
    (407,039
    )Balance,September
      30, 2004
    
    
    12,298,504
    
    $
    12,299
    
    $
    1,018,419
    
    $
    (990,841
    )
    $
    39,877




***See
accompanying summary of accounting policies and notes to financial
staements.***
 - F-4
-


*Bluestar Health, Inc.*


**STATEMENTS
OF CASH FLOWS**


**Year
Ended September 30, 2004 and**


**Period
from March 18, 2003 through September 30, 2003**




2004
    
    2003**CASH
      FLOWS FROM OPERATING ACTIVITIES**:Net
      loss
    
    $
    (407,039
    )
    $
    (583,802
    )Adjustments
      to reconcile net loss to cash used in operating
activities:Purchase
      price of Taurus financed by seller
    
    
    -
    
    
    130,000Stock
      issued for services
    
    
    240,023
    
    
    225,300Depreciation
    
    
    2,065
    
    
    -Changes
      in current assets and liabilities:Bank
      overdraft
    
    
    -
    
    
    1,988Accounts
      receivable
    
    
    (2,846
    )
    
    -Prepaid
      expenses and other current assets
    
    
    12,160
    
    
    -Accounts
      payable and accrued expenses
    
    
    40,459
    
    
    31,583Net
      cash used in operating activities
    
    
    (115,178
    )
    
    (194,931
    )**CASH
      FLOWS FROM INVESTING ACTIVITIES:**Acquisition
      of Canton Rehabilitation Services, Inc.
    
    
    98,049
    
    
    -Acquisition
      of Mississippi Central Rehabilitation, Inc
    
    
    59,466
    
    
    -Net
      cash provided by investing activities
    
    
    157,515
    
    
    -**CASH
      FLOWS FROM FINANCING ACTIVITIES**:Advances
      from shareholder
    
    
    91,354
    
    
    94,036Payments
      on note payable
    
    
    (2,702
    )
    
    (60,000
    )Issuance
      of common stock
    
    
    25,000
    
    
    160,895113,652
    
    
    194,931****
    
    
    155,989
    
    
    -**Net
      Change in Cash****CASH**,
      beginning of year
    
    
    -
    
    
    -**CASH**,
      end of year
    
    $
    155,989
    
    $
    -**SUPPLEMENTAL
      CASH FLOW INFORMATION**:Interest
      paid
    
    $
    6,197
    
    $
    -Taxes
      paid
    
    $
    -
    
    $
    -




***See
accompanying summary of accounting policies and notes to financial
staements.***
 - F-5
-


***Bluestar Health, Inc.***
**NOTES
TO FINANCIAL STATEMENTS**





Note
1 - NATURE OF
OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Nature of
business





Bluestar
Health, Inc. (Bluestar) is a healthcare management company with operations in
the areas of physical therapy and preventative care. We operate through two
subsidiaries, Bluestar Physical Therapy, Inc. and PT Centers of Texas, Inc. We
currently own and operate two outpatient physical therapy and rehabilitation
clinics, one in Jackson, Mississippi and the other in Canton,
Mississippi.





Principles
of consolidation





All
significant inter-company accounts and transactions have been eliminated in
consolidation.





Use of
Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the balance sheet. Actual results could differ from
those estimates.





Cash and
Cash Equivalents





Cash and
cash equivalents include cash and all highly liquid financial instruments with
purchased maturities of three months or less.





Goodwill





The
Company adopted Statement of Financial Accounting Standards No. 142 ("SFAS
142"), "Goodwill and Other Intangible Assets.” SFAS 142 requires that goodwill
be tested for impairment at the reporting unit level (operating segment or one
level below an operating segment) on an annual basis and between annual tests in
certain circumstances. The performance of the test involves a two-step process.
The first step of the impairment test involves comparing the fair value of the
Company's reporting units with the reporting unit's carrying amount, including
goodwill. The Company generally determines the fair value of its reporting units
using the expected present value of future cash flows, giving consideration to
the market comparable approach. If the carrying amount of the Company's
reporting units exceeds the reporting unit's fair value, the Company performs
the second step of the goodwill impairment test to determine the amount of
impairment loss. The second step of the goodwill impairment test involves
comparing the implied fair value of the Company's reporting unit's goodwill with
the carrying amount of that goodwill.





Property
and Equipment





Property
and equipment is stated at cost with depreciation calculated using the
straight-line method over the estimated useful lives. The Company has estimated
the useful lives of all assets at five years as of September 30, 2004. When
assets are retired or otherwise removed from the accounts, any resulting gain or
loss is reflected in income for the period. The cost of maintenance and repairs
is charged to expense as incurred, and significant renewals and improvements are
capitalized.


- F-6
-


***Bluestar Health, Inc.***
****NOTES
TO FINANCIAL STATEMENTS****Revenue
Recognition





Revenues
are recognized as services are provided to patients.





Allowance
for Doubtful Accounts





Earnings
are charged with a provision for doubtful accounts based on a current review of
the collectibility of accounts. Accounts deemed uncollectible are applied
against the allowance for doubtful accounts.





Income
Taxes





Income
taxes are computed using the asset and liability method. Under the asset and
liability method, deferred income tax assets and liabilities are determined
based on the differences between the financial reporting and tax bases of assets
and liabilities and are measured using the currently enacted tax rates and laws.
A valuation allowance is provided for the amount of deferred tax assets that,
based on available evidence, are not expected to be realized.





Advertising





Advertising
costs are charged to expense in the period incurred. The Company incurred
advertising costs of $20,650 and $0 in the year ended September 30, 2004 and the
period from March 18, 2003 through September 30, 2003,
respectively.





Basic
Loss Per Share





Basic
loss per share has been calculated based on the weighted average number of
shares of common stock outstanding during the period.





Recent
Accounting Pronouncements





Bluestar
does not expect the adoption of recently issued accounting pronouncements to
have a significant impact on their results of operations, financial position or
cash flow.





Note 2 -
ACQUISITIONS





On June
16, 2004, Bluestar Health, Inc. (the "Company"), through its wholly-owned
subsidiary, PT Centers, Inc., a Texas corporation, completed the acquisition of
all of the assets of two businesses known as the Mississippi Central Clinic
("Central") and the Canton Rehabilitation Clinic ("Canton") (the Central and
Canton Assets together are the "Acquired Assets").





Central
and Canton operate as two physical therapy and rehabilitation centers in
Jackson, Mississippi. The Company intends to continue operating the centers
under their existing names.





As
consideration for the Acquired Assets, the Company issued 1,150,000 shares of
common stock, restricted in accordance with Rule 144 of the Securities Act of
1933, to the two sellers of the clinics (600,000 on July 14, 2004, and 550,000
shares on July 29, 2004) (collectively the "Purchase Price") valued at $379,000.
The sellers are unrelated parties to the Company and its affiliates, and the
Purchase Price was determined by arms-length negotiations.


- F-7
-


***Bluestar Health, Inc.***
****NOTES
TO FINANCIAL STATEMENTS****


The
following table summarizes the estimated fair value of the net assets acquired
and liabilities assumed at the acquisition dates.





TotalCurrent
      assets
    
    $
    262,000Property
      and equipment
    
    
    41,000Intangibles
    
    
    137,000Total
      assets acquired
    
    
    440,000Current
      liabilities
    
    
    (43,000
    )Notes
      payable
    
    
    (18,000
    )Net
      assets acquired
    
    $
    379,000





The
consolidated statement of operations in the accompanying financial statements
for the year ended September 30, 2004 includes the operations of the clinics
from July 1, 2004 through September 30, 2004. The following are pro forma
condensed statements of operations for the years ended September 30, 2004 and
2003, as though the acquisitions had occurred on October 1, 2003.





Twelve
      Months Ended
      September
      30,2004
    
    2003Revenue
    
    $
    990,000
    
    $
    1,285,000Net
      loss
    
    $
    (544,000
    )
    $
    (540,000
    )Net
      loss per share - basic and diluted
    
    $
    (0.05
    )
    $
    (0.06
    )





Note 3 -
FURNITURE AND EQUIPMENT





Furniture
and equipment consisted of the following as of September 30, 2004:





Furniture
      and office equipment
    
    $
    11,250Transportation
      equipment
    
    
    30,00041,250Less:
      accumulated depreciation
    
    
    (2,065
    )$
    39,185





Note 4 -
ADVANCE FROM SHAREHOLDER





The
majority stockholder paid expenses on behalf of Bluestar or advanced Bluestar a
total of $185,390 as of September 30, 2004. These advances are non-interest
bearing, due on demand, and are to be repaid as cash becomes
available.


- F-8
-


**Bluestar Health, Inc.**


****NOTES
TO FINANCIAL STATEMENTS**** Note 5 -
LONG-TERM DEBT





Bluestar
has a note payable in the amount of $70,000 that is from the original
acquisition of the company. The note bears interest at 18% and was due August
15, 2003. Taurus was unable to meet the August 15, 2003 due date and obtained an
extension of the due date to February 17. 2004. At September 30, 2004, the
balance of the note was $86,350, which includes accrued interest totaling
$16,350.





In
November, 2004 the note was modified and extended. The new principal amount of
the note shall be $70,000 which shall accrue interest at the rate of twelve
percent (12%) per annum. The new maturity date shall be September 1, 2009. The
new agreement calls for 60 monthly payments of $1,557.11 beginning October 1,
2004 and continuing through September 1, 2009.





The
Company has a note payable with Merchant & Farmers Bank with monthly
payments totaling $605 including interest of 8.5%, secured by an automobile. The
balance due at September 30, 2004 was $15,067. The future maturities are as
follows:





Future
maturities of these notes are as follows:





Year
      Ending September 30,2005
    
    $
    16,9982006
    
    
    18,9432007
    
    
    16,0252008
    
    
    15,5442009
    
    
    17,55785,067Less:
      current portion
    
    
    (16,998
    )$
    68,069





Note 6 -
INCOME TAXES





Taurus
has not yet realized income as of the date of this report, and no provision for
income taxes has been made. At September 30, 2004 a deferred tax asset has not
been recorded due to Bluestar's continuing losses, which leaves them unsure as
to the use the net operating loss carryover of approximately $900,000 that
expires in 2023.





Note 7 -
COMMON STOCK





In
September 2004, Bluestar adopted a Non Qualified Stock Grant and Option plan
(the “2004 Plan”) for employees, officers, directors and consultants which
authorized the issuance of 1,200,000 shares of common stock. The 2004 Plan is
administered by the Board of Directors. The Board of Directors has the exclusive
power to select the participants in the 2004 Plan, to establish the terms of the
options granted to each participant, and to make all determinations necessary or
advisable.


- F-9
-


**Bluestar Health, Inc.**


****NOTES
TO FINANCIAL STATEMENTS****


During
the year ended September 30, 2004, Bluestar did not issue any shares of common
stock under this plan. In October, 2004 a total of 585,500 shares of stock were
issued to consultants that will be expensed based on the stock price on the date
issued.





In August
2003, Bluestar adopted a Stock Option and Grant plan (the "2003 Plan") for
employees, officers, directors and consultants which authorized the issuance of
650,000 shares of common stock. The Plan is administered by the Board of
Directors. The Board of Directors has the exclusive power to select the
participants in the Plan, to establish the terms of the options granted to each
participant, and to make all determinations necessary or advisable. The
following shares were issued under the plan as of September 30,
2004:


(1)
    500,000
      shares from March 18, 2003 through September 30, 2003 for consulting
      services at a value of $225,300.
 (2)
    148,000
      shares for the year ended September 30, 2004 for consulting services at a
      value of $106,550


During
the year ended September 30, 2004, Bluestar also issued 230,000 restricted
shares of common stock for consulting services at a value of $133,473.





Note 8 -
COMMITMENTS AND CONTINGENCIES





The
Company has leases for both the office space and the clinic spaces on a month to
month basis. Total rent expense for these leases were approximately $26,000 for
the year ended September 30, 2004 and $9,000 for the period March 18, 2003 to
September 30, 2003.





In
December, 2004 Bluestar signed a two year lease for their office in Jackson, MS
at a cost of $2,500 per month.





Employment
Agreement





In July
2004, Bluestar entered into an employment agreement with Frank Wiley, our Vice
President and General Manager. In accordance with the agreement, Mr. Wiley is
entitled to be paid $60,000 per year for his services. The term of Mr. Wiley’s
employment agreement is five years but the agreement may be terminated by either
party with cause on 30 days written notice. Mr. Wiley’s employment agreement may
be extended by mutual written consent of Bluestar and Mr. Wiley.





Contingencies





In
November 2003, a lawsuit was filed by R. Dean Ayers against our subsidiary,
Bluestar Physical Therapy, Inc., alleging breach of contract in the amount of
$16,773.66. On January 27, 2005, we settled this dispute with Mr. Ayers for
$10,000 cash, 24,000 shares of our common stock, and the mutual execution of
general releases.





In the
ordinary course of business, we are from time to time involved in various
pending or threatened legal actions. The litigation process is inherently
uncertain and it is possible that the resolution of such matters might have a
material adverse effect upon our financial condition and/or results of
operations. However, in the opinion of our management, matters currently pending
or threatened against us are not expected to have a material adverse effect on
our financial position or results of operations.


- F-10
-


**Bluestar Health, Inc.**


****NOTES
TO FINANCIAL STATEMENTS****




Note 9 -
SUBSEQUENT EVENTS





In
October 2004, Bluestar issued 120,400 shares of stock to consultants which will
be expensed based on the value stock on the date issued.





- F-11
-