UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K





[X]
                                              ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the fiscal year ended  March 31, 2009[  ]
                                              TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACTFor
      the transition period from _________ to ________Commission
      file number:333-140438





Blue Earth Solutions,
  Inc.(Exact
      name of registrant as specified in its charter)Nevada
                                                                          26-1909139(State
      or other jurisdiction of incorporation or organization)
                                                                          (I.R.S.
      Employer Identification No.)13511 Granville Ave. Clermont,
      FL
                                                                          34711(Address
      of principal executive offices)
                                                                          (Zip
      Code)Registrant’s
      telephone number, including area code: 352-729-0150Securities
      registered pursuant to Section 12(b) of the Exchange Act:Title
      of each class
                                                                          Name
      of each exchange on which registeredNone
                                                                          not applicableSecurities
      registered pursuant to Section 12(g) of the Exchange Act:Title
      of each classnone





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities
Act. Yes   No X




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the
Act. Yes X  No 




Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past
90 days. Yes X  No 




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). [  ] Yes [X]
No




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not 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-K or any
amendment to this Form 10-K. 




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.  See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the
Exchange Act. (Check one):





Large
accelerated filer      Accelerated
filer   Non-accelerated filer    Smaller
Reporting Company X




Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange
Act). Yes   No X


State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter:  N/A


Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date – 31,632,602 as of March 31,
2009.


Documents
Incorporated by Reference: None.
  Table of Contents




TABLEOF
CONTENTS


PagePART IItem 1.
                                              Business
                                              3Item 2.
                                              Properties
                                              9Item 3.
                                              Legal Proceedings
                                              9Item 4.
                                              Submission of Matters to a Vote of Security
      Holders
                                              10PART IIItem 5.
                                              Market for Registrant’s Common Equity, Related Stockholder
      Matters and Issuer Purchases of Equity Securities
                                              10Item 7.
                                              Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
                                              12Item 8.
                                              Financial Statements and Supplementary Data
                                              18Item 9.
                                              Changes In and Disagreements With Accountants on Accounting and
      Financial Disclosure
                                              18Item 9A.
                                              Controls and Procedures
                                              19Item 9B.
                                              Other Information
                                              20PART IIIItem 10.
                                              Directors, Executive Officers, Promoters and Corporate
      Governance
                                              21Item 11.
                                              Executive Compensation
                                              25Item 12.
                                              Security Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters
                                              29Item 13.
                                              Certain Relationships and Related Transactions, and Director
      Independence
                                              30Item 14.
                                              Principal Accountant Fees and Services
                                              31PART
      IVItem 15.
                                              Exhibits, Financial Statement Schedules
                                              32
 
 2
 Table of Contents
  PART I
 Item1.   Business
 
 Business
Development
 
 We were
incorporated on March 28, 2006 as RM Health International, Inc., a Nevada
corporation, and we conducted business under the name “R&M Online Health.”
We have been providing an education resource and online purchase facility to the
public through our website, www.rmhealthonline.com (our “Site”). On May 16,
2008, we entered into an Agreement and Plan of Merger with Blue Earth Solutions,
Inc., a privately held Delaware corporation (“Blue Earth Delaware”), and Blue
Earth Acquisition, Inc. (“Acquisition Sub”), our newly formed wholly-owned
Nevada subsidiary.  In connection with the closing of this merger
transaction, Blue Earth Delaware merged with and into Acquisition Sub on May 16,
2008, with the filing of articles of merger with the Nevada and Delaware
secretaries of state.  Subsequently, on May 16, 2008, we merged with
our Acquisition Sub in a short-form merger transaction under Nevada law in which
we were the surviving entity and, in connection with this short form merger,
changed our name to Blue Earth Solutions, Inc., effective May 16,
2008.
 
 Description
of Business
 
 Overview
 
 We are
primarily engaged in the business of developing, implementing and marketing a
practical, economical and safe means of recycling polystyrene foam, also known
as Expanded Polystyrene (“EPS”) using two distinct
methodologies.  First, we are developing and we are operating on a
method of recycling EPS which we call our Blue Line. Second we are continuing to
develop the StyroSolveTM system which is a closed-loop process for collecting and
recycling EPS foam products.
 
 Polystyrene
 
 Polystyrene
is a lightweight plastic material derived from petroleum and natural gas
products with a chemical structure consisting of a long chain hydrocarbon with
every other carbon connected to a Phenyl group.  Polystyrene is
produced in two varieties:  (1) an expanded polystyrene variety, also
known as foam, typically used in the packaging and insulation industries, and
(2) a non-expanded (non-foam) variety, used for making a wide variety of hard
plastic products, from utensils to toner cartridges.
 
 Expanded
Polystyrene, or EPS, is the correct name for polystyrene foam (EPS is sometimes
incorrectly called StyrofoamTM, which is a separate product and a trademark of
Dow Chemical Company). EPS is produced from a mixture of about 90-95%
polystyrene and 5-10% gaseous blowing agent, most commonly pentane or carbon
dioxide. Foam is used in packaging, including end caps, and other items such as
architectural structures (i.e. columns, moldings and forms), seedling trays,
cups, bowls, plates, trays, “clamshell” containers, egg cartons and other food
services related products. EPS also has various military applications for
ammunition, aircraft, and thousands of other items.
  3
 Table of Contents
 
 The
non-foam variety of polystyrene is commonly used for plastic utensils and
cutlery, yogurt and cottage cheese containers, clear “clamshell” containers used
for salad bar take-out and various manufactured goods including appliances,
toys, video cassettes, DVD Cases, tools, computer casings, razors, desk
accessories and furniture.
 
 Since
both the expanded and non-expanded varieties of polystyrene are comprised of the
same chemical materials, they may be treated collectively during the recycling
process. The primary difference in the two varieties lies in the volume of space
required by the foam version prior to reduction.
 
 Polystyrene
products are popular because they are:
 
 ·
              Sturdy,
      rigid and lightweight, making them easier than most alternatives to
      transport.
 ·
              Energy
      efficient, requiring much less energy in production compared to competing
      products.
 ·
              Excellent
      insulation, resisting temperature change and making hot or cold items
      easier to handle.
 ·
              Sanitary,
      preventing the growth and spread of bacteria in comparison to reusable
      plates and utensils.
 ·
              Economical,
      costing considerably less than alternative
  materials.
 ·
              Inert
      – they will not leech chemicals into the water supply if placed in a
      landfill.
 
 The
polystyrene production industry is populated by the large chemical companies
that produce polystyrene components. Currently Dow Chemical, Huntsman, and
Tenneco (a subsidiary of Paper Corporation of America) are the largest
manufacturers of polystyrene products. Tenneco, the latest market entrant,
gained its industry presence through the acquisition of the polystyrene
divisions of former competitors including Exxon, Mobil Oil and Amoco
Oil.
 
 EPS
Recycling
 
 The
polystyrene market in the United States and China is significant, as is the
potential market for polystyrene recycling.  Approximately 1.2% of the
30 billion pounds of polystyrene produced each year is recycled. Over 50% of
China’s EPS is exported to the US market as packaging material. EPS is generally
considered the most commonly used packaging material both nationally and
internationally.  However, EPS’s uncommonly high volume to weight
ratio – a relatively small amount of EPS by weight occupies a very large volume
when put into landfills – results in EPS accounting for the largest volume of
waste polystyrene.  Consequently, companies and facilities managers
must pay proportionally higher transport costs for the hauling of EPS from trash
cans and dumpsters to landfills due to its bulk.
 
 While
there are a myriad of applications for polystyrene, there has historically been
no economical way to transport and recycle the material.  This lack of
reusability has become a major focus and concern for a rising population of
environmentally conscious individuals, corporations, and
governments.  Cities such as San Francisco and Berkeley, California
have even instituted bans on EPS as packaging material for food
products.
  4
 Table of Contents
 
 Polystyrene
recycling is currently a small, fractured market, and competition in the field
is varied. There are several companies that are currently recycling
polystyrene.  There are two primary challenges associated with
handling EPS:  first, transportation costs are high because of the
high volume to weight ratio of EPS, and second, EPS must be extremely clean to
be accepted by an EPS recycling plant.
 
 EPS
recycling has been available for years, but has had low penetration due to the
absence of a clear solution to the above-referenced challenges. Our
solvent-based approach to EPS recycling is unique to the industry. Other
approaches to EPS recycling include the following:
 
 ·
              Melting
      – There are machines that melt the EPS in order to reduce its volume.
      While this technique does reduce volume effectively, it requires a very
      high temperature (between 400 and 500 degrees Fahrenheit) to melt
      polystyrene, making this method costly.  Also, because the high
      temperature changes the chemical structure of the polystyrene, the
      resulting product cannot be recaptured as a polystyrene
      bead.  Instead, heat-reduced bricks are created, which have
      limited uses and are thus less economically
  viable.
 ·
              Shredding
      – Some recyclers shred EPS upon collection, which in most cases increases
      the volume, as greater surface area is created and the EPS is “fluffed” or
      aerated.  This method involves grinding, washing, fluffing and
      drying EPS before sending the shredded EPS through an extruder. In order
      to use this technology, the polystyrene has to be completely clean
      initially, so normal post-consumer and industrial waste EPS cannot be
      recycled using this method.
 ·
              Compacting
      – Another technique used at the front end of the recycling process is
      compacting.  Machines compress EPS under high pressure and bale
      it for transport.  This process removes much, but not all, of
      the air in EPS. Resulting in approximately 50% reduction, this method is
      less volume-efficient than melting, but retains the EPS’s chemical
      composition.  The bales are wrapped with wire under high
      pressure, which can be dangerous to operators when a bale is released or
      broken.
 
 Our Blue
Line system uses many of these traditional recycling
technologies.  Our goal is to improve upon these traditional methods
using improved manufacturing techniques.  Ultimately, our goal is to
move entirely to our closed-loop Styrosolve system.  Many practical
and technological challenges remain, however, and there can be no assurance that
we will be successful.
 
 EPS
Recycling Systems
 
 We are
presently pursuing development of two distinct systems for recycling EPS, our
original StyrosolveTM system and our alternate Blue Line system.  Our
StyroSolveTM system for recycling EPS is a closed loop, next generation
polystyrene recycling process utilizing StyroSolveTM, our safe,
environmentally-friendly solvent.
  5
 Table of Contents
 
 We have
tested our StyrosolveTM process for recycling EPS only on a small scale in a test
production environment. Thus far, we have experienced significant delays and
technical obstacles in our efforts to move to meaningful production scale using
our StyrosolveTM process.  As a result, we have not utilized this
process on a large, commercial scale. Because we have not yet tested or
conducted operations on a commercial scale, we cannot predict what additional
technical, operational, or business challenges may arise as we try to commence
recycling operations using our StyrosolveTM process on a commercial scale. On a
testing and limited production basis, however, our StyrosolveTM process has not
proved as efficient as anticipated and does not yet offer advantages over
existing EPS recycling methodologies in practice.  We may or may not
be able to overcome the challenges that have arisen and conduct operations using
our StyrosolveTM process successfully on a scale necessary to achieve profitable
operations. Thus, our StyrosolveTM process must be considered unproven
technology.
 
 Simultaneous
with the development of the StyroSolveTM system, we have pursued a separate
process to convert EPS into marketable plastic pellets which we are calling our
“Blue Line” (“Blue Line”). Our Blue Line system primarily uses established
recycling technologies and methods.  Compared to our StyrosolveTM
system, the Blue Line creates less waste, converts a higher percentage of EPS
into useable crystal polystyrene pellets, reduces energy consumption, requires
fewer chemical inputs, occupies less square footage and is less labor intensive.
The Blue Line system is presently running on a limited production basis
only.  As with our StyrosolveTM process, we may or may not be able to
overcome the challenges that arise and conduct operations using our Blue Line
process successfully on a scale necessary to achieve profitable operations.
Thus, our Blue Line process must also be considered unproven
technology.
 
 Other
Products
 
 In
addition to the products and processes we own relating to the recycling of
polystyrene, we possess six additional products.  We do not anticipate
that the production and sale of these products will be significant in comparison
to our polystyrene recycling operations.  Each of these products has
been produced, marketed, and distributed on a very limited basis only to date,
and include:
 
 ·
              Tire
      Muscle®.  Tire Muscle® is a tire-sealing product designed for
      large vehicles, such as concrete trucks, eighteen wheelers, and other
      construction vehicles that are likely to drive in areas where nails,
      rebar, and other tire hazards exist.  Tire Muscle® can seal a
      hole in a tire up to three-eighths of an inch in
  diameter.
 ·
              Dumpster
      EaseTM and Diaper EaseTM consist of a single proprietary formulation that
      helps to remove odors in garbage containers, restaurant kitchens, diaper
      pails and other industrial and residential locations where smells can
      gather.
 ·
              Nu-Silver,
      Nu-Brass, and Nu-Chrome are proprietary chemical products designed for the
      polishing and renewal of silver, brass, and
  chrome.
 
 6
 Table of Contents
  Competition
 
 Competition
in the field of polystyrene recycling is not intense at this point, but may
increase in the future.  We expect to experience significant
competition from other polystyrene recycling companies, or from polystyrene
manufacturing companies. At this time, we are not aware of any other commercial
entity that is researching or developing techniques for the recycling of
polystyrene utilizing methods similar to our StyrosolveTM process. Different
methods of polystyrene recycling are being used in a variety of other
applications. The following are polystyrene recycling companies known to
us.
 
 ·
              Demand Foam Cutting
      Systems sells a foam densifier that reduces waste foam by grinding
      and then melting foam into a recyclable patty polystyrene that is
      1/80th
      the volume of the original scrap foam. The resulting plastic patty has
      limited uses when recycled, however, because the heat used in the
      reduction changes the chemical properties of the EPS. They also sell a
      product called the Foam GobblerTMthat grinds EPS foam into fine pieces 1/4" or less using opposing,
      rotating knife drums. This allows for easier disposal or re-use of EPS as
      a filler, but does not recycle the
EPS.
 ·
              Dart operates EPS foam
      recycling centers at their production facilities in Michigan,
      Pennsylvania, Florida, and Ontario, Canada, capable of reprocessing 12
      million pounds of foam products annually. All four facilities have
      accepted material for recycling from the public since 1990. The company
      claims their engineers invented "a state-of-the-art process for washing
      and drying used foam foodservice products." This is significant as
      traditional methods of recycling EPS (heat and pressure) have been limited
      to use with very clean EPS. Their four plants receive foam from local
      schools, community recyclers, supermarkets, hospitals, manufacturing
      plants, cafeterias, and individuals, then sell their recycled polystyrene
      in the form of polystyrene pellets to manufacturers who reprocess it into
      useful products. Dart also utilizes heat and pressure in their recycling
      process, however, incurring greater energy costs in their recycling
      process and limiting the utility of their final
  product.
 ·
              The CyberYard.com/Memphis Foam
      Recycling offers Midsouth manufacturers and distributors a way to
      cost-effectively dispose of their surplus or used EPS.  The
      company will pick up the material on a scheduled or on-demand basis and
      recycle it locally.  They retrieve and densify white, homogenous
      EPS and then supply the material to nationwide manufacturers for
      reuse.  They maintain EPS recycling facilities that can
      accommodate large quantities of material on a long-term
    basis.
 
 Intellectual
Property
 
 We
possess technology and formulas protected by U.S. Patent #5,223,543 #6,743,828
B1, #7,241,858 B2 and #7321,003 B2. The patents cover the EPS recycling process
used by the StyroSolve system. These systems are marketed under the StyroSolve TM
brand name, which is also owned by us.  We have not applied for any
intellectual property protection for our Blue Line system, and may not be able
to do so as it is largely based on existing recycling technologies and
methods.
 
 We have
not filed patent applications for the key technologies underlying our six other
products which we have acquired, specifically Tire Muscle®, Dumpster EaseTM,
Diaper EaseTM, Nu-Silver, Nu-Brass, and Nu-Chrome.
 
 We intend
to aggressively assert our rights under trade secret, unfair competition,
trademark and copyright laws to protect our intellectual property, including
product formulas, proprietary manufacturing processes and technologies, product
research and concepts, and recognized trademarks. These rights are protected
through the acquisition of patents and trademark registrations, the maintenance
of trade secrets, the development of trade dress, and, where appropriate,
litigation against those who are, in our opinion, infringing these
rights.
 
 While
there can be no assurance that registered trademarks will protect our
proprietary information, we intend to assert our intellectual property rights
against any infringer. Although any assertion of our rights can result in a
substantial cost to, and diversion of effort by, our company, management
believes that the protection of our intellectual property rights is a key
component of our operating strategy.
  7
 Table of Contents
 
 Employees
 
 As of
March 31, 2009 we had nineteen full-time employees, including management,
administrative support, research staff, and operational personnel. None of our
employees are covered by a collective bargaining agreement. We have employment
agreements in place for our CEO and corporate secretary, Patricia Cohen; our
President and CFO, Paul Slusarczyk. We also had a written consulting agreement
in place with Richard Iantosca, a chemical specialist on March 31, 2009, whereby
we agreed to pay Mr. Iantosca $3,000 per month in exchange for scientific
consulting services.  Mr. Iantosca’s consulting services were
terminated in April of 2009.
 
 Governmental
Regulation
 
 With the
exception of the environmental laws noted below, we are unaware of and do not
anticipate having to expend significant resources to comply with any
governmental regulations of the recycling industry. We are subject to the laws
and regulations of those jurisdictions in which we plan to sell our product,
which are generally applicable to business operations, such as business
licensing requirements, income taxes and payroll taxes. In general, the
collection, recycling, and sale of polystyrene in the United States is not
subject to special regulatory and/or supervisory requirements.
 
 Compliance
with Environmental Laws
 
 Our
business may be subject, in certain instances, to supervision and regulation by
state and federal governmental authorities, specifically the U.S. Environmental
Protection Agency (“EPA”) and state counterparts. We will comply with all EPA
and other requirements for receiving and mixing chemicals and intend to comply
with all future regulations and requirements.
 
 Research
and Development Expenditures
 
 We have
not incurred any research or development expenditures since our
incorporation.
 
 Subsidiaries
 
 We
currently have five wholly owned subsidiaries in five separate
states.  These entities were formed for the purpose of purchasing real
property and/or issuing municipal bonds.  There is currently no
activity in any of the subsidiaries.  We will form additional
subsidiaries as required by the terms of any municipal bond financing we are
able to obtain as many of the jurisdictions in which we are trying to obtain
such financing will require that the issuer be incorporated in that
jurisdiction.
  8
 Table of Contents
 
 Item2.   Properties
 
 We
conduct our operations from our principal office located at 13511 Granville
Ave., Clermont, FL, 34711.  The space occupied for our office and
processing center is approximately 11,000 square feet.  This property
is encumbered by a mortgage in the principal amount of $1,049,000, due in twenty
six months, with interest only payments due monthly until maturity in the amount
of $6,119.17.
 
 Item3.   Legal Proceedings
 
 On
December 22, 2008, the Company filed an action in the Eighth Judicial District
Court in and for Clark County, Nevada, at case no. 08-A-578406-B, against
several persons, including former director and 5% shareholder Harvey Katz, and
former employee Claudia Iovino, Iovino’s husband, a shareholder Caicedo
Resources LLC and brokerage firms Glendale Securities, Citigroup Global Markets,
Smith Barney, and Penson Financial Services.  Our complaint alleged
multiple causes of action arising out of the conversion of the Company’s Series
A Preferred Stock by Katz and Iovino into common stock in or about October 2008,
and the subsequent public resale by Katz, Iovino, and Caicedo of some of those
shares and / or other common stock held by the defendants.  The
gravamen of the Company’s complaint was that the shares of common stock held by
the Defendants, including the shares resulting from the conversion of the Series
A Preferred Stock, could not be publicly resold by Defendants.  The
Company’s complaint sought both damages and injunctive relief.  The
Company moved for both a temporary restraining order and a preliminary
injunction enjoining further sales of the securities and freezing the proceeds
of all sales consummated thus far.
  On
December 22, 2008, the court issued a temporary restraining order which, inter alia, barred further
sales of those shares by all defendants and temporarily freezing all proceeds of
sales already consummated.  Defendants Katz and Iovino responded and
objected to the TRO and any preliminary injunction on several grounds, including
that SEC Rule 144 permitted the public resale of the securities in
question.  On January 12, 2008, the court held a hearing on the
Company’s motion for a preliminary injunction.  On January 16, 2009,
the court entered a preliminary injunction which, inter alia, enjoined any
further sale of the securities until the earlier of a full trial on the merits
or May 20, 2009, but returned the proceeds of prior sales of the securities at
issue to the defendants.
  Defendants
Katz and Iovino filed an Answer and Counterclaim on January 29, 2009, an Answer
and Amended Counterclaim on February 9, 2009 and a Second Amended Counterclaim
on March 17, 2009 seeking unspecified damages.  The parties are now
engaged in discovery, which is scheduled to end on November 29,
2009.  No trial date has yet been set.  The Company
continues to vigorously prosecute its claims and defend against Katz and
Iovino’s counterclaims.
  9
 Table of Contents
 
 Item4.   Submission of Matters to a Vote of Security
Holders
 
 No
matters were submitted to a vote of the Company's shareholders during the
quarter ended March 31, 2009.
  PART II
 
 Item5.    Market for Common Equity and Related
Stockholder Matters and Small Business Issuer Purchases of Equity
Securities
 
 Market
Information
 
 Our
authorized capital stock consists of 74,500,000 shares of common stock, $0.001
par value per share, and 500,000 shares of preferred stock, $0.001 par value per
share. As of June 25, 2009, there were 31,632,602 shares of our common stock and
14,130 shares of our Series C Preferred Stock issued and
outstanding,
 
 Our
common stock is currently quoted on the OTC Bulletin Board (“OTCBB”), which is
sponsored by the FINRA. The OTCBB is a network of security dealers who buy and
sell stock. The dealers are connected by a computer network that provides
information on current "bids" and "asks", as well as volume information. Our
shares are quoted on the OTCBB under the symbol “BESN.”
 
 The
following table sets forth the range of high and low sales price for our common
stock for each of the periods indicated as reported by the OTCBB. These
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
 
 Fiscal
      Year Ending March 31, 2009(1)Quarter
      Ended
                            
                            High
      $
                            
                            Low
      $March
      31, 2009
                            
                            $2.85
                            
                            $1.75December
      31, 2008
                            
                            $7.95
                            
                            $2.16September
      30, 2008
                            
                            $11.90
                            
                            $4.60June
      30, 2008
                            
                            $5.60
                            
                            $3.20Fiscal
      Year Ending March 31, 2008Quarter
      Ended
                            
                            High
      $
                            
                            Low
      $March
      31, 2008
                            
                            0
                            
                            0December
      31, 2007
                            
                            0
                            
                            0September
      30, 2007
                            
                            0
                            
                            0June
      30, 2007
                            
                            0
                            
                            0
 (1)Prior
to June 9, 2008, we traded as RMHL.  The high and low sales prices
shown for the quarter ended June 30, 2008, reflects the high and low sales price
once the stock began trading as BESN on June 9, 2008.
 10
 Table of Contents
 Holders
of Our Common Stock
 
 As of
June 25, 2009, we had 31,632,602 shares of our common stock issued and
outstanding, held by 77 shareholders of record.
 
 Dividends
 
 The
Company has not declared, or paid, any cash dividends since inception and does
not anticipate declaring or paying a cash dividend for the foreseeable
future.
 
 Nevada
law prohibits our board from declaring or paying a dividend where, after giving
effect to such a dividend, (i) we would not be able to pay our debts as they
came due in the ordinary course of our business, or (ii) our total assets would
be less than the sum of our total liabilities plus the amount that would be
needed, if the corporation were to be dissolved at the time of distribution, to
satisfy the rights of any creditors or preferred stockholders.
 
 Securities
Authorized for Issuance Under Equity Compensation Plans
 
 Equity
      Compensation Plan Information
                            As
      of March 31, 2009Plan
      category
                          Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
                            (a)
                          Weighted-average
      exercise price of outstanding options, warrants
                            and
      rights
                            (b)
                          Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column
      (a))
                            (c)Equity
      compensation plans approved by security holders
                          0
                          0
                          0Equity
      compensation plans not approved by security holders
                          0
                          0
                          0Total
                          0
                          0
                          0
 
 (a)
              No
      stock rights exist at March 31,
2009
 (b)
              No
      stock rights exist at March 31,
2009
 (c)
              No
      stock rights exist at March 31,
2009
 
 11
 Table of Contents
  Recent
Sales of Unregistered Securities.
 
 On
October 21, 2008, Claudia and Nic Iovino converted 160,000 shares of our Series
A Preferred Stock into 2,400,000 shares of our common stock and Harvey Katz
converted 240,000 shares of our Series A Preferred Stock into 3,600,000
shares of our common stock.
  Item7.  Management’s Discussion and Analysis of Financial
Condition and Results of Operations
 
 Forward-Looking
Statements
 
 This
Annual Report contains forward-looking statements, as defined in the Private
Securities Litigation Reform Act of 1995. To the extent that any statements made
in this Report contain information that is not historical, these statements are
essentially forward-looking. Forward-looking statements can be identified by the
use of words such as “expects,” “plans,” “will,” “may,” “anticipates,”
believes,” “should,” “intends,” “estimates,” and other words of similar meaning.
These statements are subject to risks and uncertainties that cannot be predicted
or quantified and, consequently, actual results may differ materially from those
expressed or implied by such forward-looking statements. Such risks and
uncertainties include, without limitation:
 
 ·
         Our limited and unprofitable operating
    history;
 ·
         the ability to raise additional capital to finance our
      activities;
 ·
         legal and regulatory risks associated with the
      Merger;
 ·
         the future trading of our common
  stock;
 ·
         our ability to operate as a public
  company;
 ·
         general economic and business
  conditions;
 ·
         the volatility of our operating results and financial
      condition; and
 ·
              our
      ability to attract or retain qualified senior scientific and management
      personnel.
 
 The
foregoing factors should not be construed as exhaustive and should be read in
conjunction with the other cautionary statements that are included in this
Annual Report on Form 10-K.
 
 Information
regarding market and industry statistics contained in this Report is included
based on information available to us that we believe is accurate. It is
generally based on industry and other publications that are not produced for
purposes of securities offerings or economic analysis. We have not reviewed or
included data from all sources, and cannot assure investors of the accuracy or
completeness of the data included in this Report. Forecasts and other
forward-looking information obtained from these sources are subject to the same
qualifications and the additional uncertainties accompanying any estimates of
future market size, revenue and market acceptance of products and services. We
do not undertake any obligation to publicly update any forward-looking
statements. As a result, investors should not place undue reliance on these
forward-looking statements.
 
 12
 Table of Contents
  Plan
of Operation


THE
FOLLOWING DISCUSSION SHOULD BE READ TOGETHER WITH THE INFORMATION CONTAINED IN
THE FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS CURRENT
REPORT.
 
 The
following discussion reflects our plan of operation. This discussion should be
read in conjunction with the audited financial statements of Blue Earth Delaware
for the fiscal year ended March 31, 2008. This discussion contains
forward-looking statements, within the meaning of Section 27A of the Securities
Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as
amended, and the Private Securities Litigation Reform Act of 1995, including
statements regarding our expected financial position, business and financing
plans. These statements involve risks and uncertainties. Our actual results
could differ materially from the results described in or implied by these
forward-looking statements as a result of various factors, including those
discussed below and elsewhere in this Current Report, particularly under the
headings “Forward Looking Statements” and “Risk Factors.”
 
 Overview
 
 As of
March 31, 2009, we conduct limited operations only from our facility at 13511
Granville Ave., Clermont, FL, 34711, utilizing our Blue Line
system.
 
 We had
anticipated beginning recycling operations on a full commercial scale during the
quarter ended September 30, 2008, but have experienced unexpected
delays.  We may or may not be able to overcome the challenges that
arise and conduct operations successfully on a scale necessary to achieve
profitable operations. Therefore, our processes must be considered unproven
technologies and a high-risk business plan.
 
 Anticipated
Expenses in the next twelve months
 
 Over the
next twelve months, we intend our efforts to extend our operations beyond our
Clermont, Florida plant to processing centers in Memphis, TN, Atlanta, GA,
Dallas TX, Houston, TX, Fort Smith AK, Jacksonville, FL and locations within the
states of California, Oregon, Washington, Nevada, Arizona, Colorado and
Utah.  We do not presently have sufficient capital to fully proceed
with this expansion plan.  In connection with raising this additional
capital, we will incur appropriate accounting and legal fees.  Our
ability to open additional processing centers will be dependent upon our success
in obtaining financing, primarily through municipal bond offerings sponsored by
the communities where we plan to build processing centers. Thus far we have been
unsuccessful in obtaining this financing, which has delayed our efforts to add
additional facilities.  Should we continue to be unsuccessful in
obtaining municipal bond financing, our business plan may be further
delayed.
 
 13
 Table of Contents
  Should we
be successful in obtaining the necessary municipal bond financings to open
additional facilities, we anticipate that the approximate expenses associated
with the cost of opening and operating each processing center for twelve months
will be as follows:
 
 Processing
Center
 
 Item
                              
                              Average
      Cost of OpeningBuilding
      and improvements
                              
                              $
                              3,069,188Processing
      Line One
                              
                              $
                              2,369,500Processing
      Line Two
                              
                              $
                              755,000Equipment,
      electrical, etc common two both lines
                              
                              $
                              440,000Material
      Handling Equipment
                              
                              $
                              98,600Recycling
      equipment
                              
                              $
                              25,500Transportation
      equipment
                              
                              $
                              900,000Miscellaneous
      Maintenance and Safety Equipment
                              
                              $
                              14,500Office
      Furniture
                              
                              $
                              21,750Operational
      and production Technology
                              
                              $
                              742,800Start
      up expenses
                              
                              $
                              416,950Total
                              
                              $
                              8,853,788
 
 We also
expect to incur approximately $1,190,000 per year in other expenses including:
executive salaries totalling $825,000 annually; office supplies, phones, and
miscellaneous expenses totalling $90,000 annually; marketing and public relation
costs of $125,000 annually, including three staff members; and legal and
accounting fees totalling $250,000 annually. Including the above, we anticipate
that we will require approximately $9,000,000 per location in order to fully
implement our business plan in the next twelve months.
 
 Plan
for other Products and Services
 
 In
addition to our recycling operations, we produce six other products on a very
limited basis, including Tire Muscle®, Dumpster Ease, Diaper Ease, Nu-silver,
Nu-Brass, and Nu-Chrome.  These products have a limited customer base
and have not been heavily marketed or distributed. We intend to continue
producing small amounts of these products for existing customers while seeking
other companies or individuals that may wish to purchase the rights to these
products.
  14
 Table of Contents
 
 Marketing
Plan & Sales Strategy
 
 Our goal
is to become the industry leader in the recycling of polystyrene. Our initial
marketing efforts will focus on acquiring EPS for recycling and re-sale as
Pellets. We will attempt to build relationships that will aid us in acquiring
scrap EPS from the construction industry, the packaging industry, local and
state governments, military bases and vessels, and the food services industry.
Our executive management will initially be responsible for contacting and
creating relationships with decision-makers within these areas. They will
present information regarding the fiscal, environmental, and public relations
impact of utilizing our services.
 
 We also
intend to increase public awareness of our company and our Process to create
public support for our services. We intend to use Internet-based and traditional
media to accomplish this. If the general public supports our efforts for
environmental reasons, we feel that the likelihood of large organizations
utilizing our services increases significantly. We also intend to work closely
with trade groups, including the International Expanded Polystyrene recycling
Association (“INEPSA”) and the Alliance of Foam Packaging Recyclers (“AFPRA”) to
introduce the technology to the industry. By coordinating our public awareness
campaigns with theirs, we feel we can educate a broader audience regarding the
recycling of EPS in general, and regarding our services in
particular.
 
 We also
plan on attending relevant national events and conferences. There are events and
conferences managed by national institutions and organizations to promote their
respective industries. We plan to attend a number of events attended by the
organizations mentioned above that generate a large amount of scrap EPS. These
events will include trade meetings, promotional events, seminars, and
conferences, which are heavily attended by decision-makers within those
industries, in order to further expose our services.
 
 We intend
to work with landfills serving the areas around our processing center and
transfer stations. By intercepting EPS bound for the landfill, we believe that
we can extend the life of the landfill and reduce the environmental impact of
EPS. Similarly, we will work to provide EPS recycling on a residential level in
communities where there is already a residential recycling pick-up program in
place. In such cases, we will attempt to partner with those companies that are
already picking up paper, aluminum, and glass products, allowing them to add EPS
to their list of recyclable material and providing additional scrap EPS for
us.
 
 In
addition to acquiring scrap EPS to recycle into Pellets, we will need to sell
the Pellets, which we will produce. The market for polystyrene pellets, however,
is open and well-established. While we plan to expend as much effort as we deem
necessary to sell our Pellets, demand within the plastics manufacturing industry
is such that we do not anticipate any difficulties in selling our Pellets.
Polystyrene pellets are the same regardless of the supplier and prices are
relatively fixed. Our executive management will work to establish contacts
within the industry to ensure that we are able to participate in this market in
a profitable manner. By working closely with companies that manufacture products
from polystyrene, we will also be able to provide a public relations boost to
these partners, as they will be able to promote their products as both recycled
and recyclable. These types of partnerships should further ensure a steady
market for our Pellets.
  15
 Table of Contents
 
 Sales
Personnel
 
 As of
March 31, 2009, we have hired and deployed one sales person to focus on foam
collection in the Central Florida area. We have been contracting independent
marketing representatives to sell and distribute Tire Muscle, Dumpster Ease and
other proprietary formulas and polishes.  In addition, we will
continue to use the services of our executive management to sell our
services and products. As the area in which our services and products are
offered expands, however, we plan to employ additional regional sales
representatives to promote and sell our recycling services to governments,
companies, and the general public. These sales representatives will be
responsible for soliciting, selecting and securing accounts within a particular
regional territory.  We may or may not continue this pay policy depending
on the territory in the country.  We expect to provide service and support
to our sales representatives, including advertising and sales
materials.
 
 Governmental
Regulation
 
 With the
exception of the environmental laws noted below, we are unaware of and do not
anticipate having to expend significant resources to comply with any
governmental regulations of the recycling industry. We are subject to the laws
and regulations of those jurisdictions in which we plan to sell our product,
which are generally applicable to business operations, such as business
licensing requirements, income taxes and payroll taxes. In general, the
collection, recycling, and sale of polystyrene in the United States is not
subject to special regulatory and/or supervisory requirements.
 
 Compliance
with Environmental Laws
 
 The
business may be subject, in certain instances, to supervision and regulation by
state and federal governmental authorities, specifically the U.S. Environmental
Protection Agency (“EPA”) and state counterparts. We will comply with all EPA
and other requirements for receiving and mixing chemicals and intend to comply
with all future regulations and requirements.
 
 Critical
Accounting Policies
 
 Our
significant accounting policies are described in Note 1 of the Financial
Statements.
 
 Results
of Operations for the Three and Twelve Months Ended March 31, 2009 and the
Period from February 5, 2008 (Date of Inception) until March 31,
2009
 
 Revenue
of $11,414 and $31,867 was generated for the three and twelve months ended March
31, 2009 and the period from February 5, 2008 (Date of Inception) respectively.
Sales in the three months ended March 31, 2009 were primarily a result of pellet
sales and the other sales were from sales of our non-recycling related products,
primarily Tire Muscle® and Dumpster EaseTM. Cost of Sales for the same time
periods were $58,005 and $64,991 respectively. The Company incurred negative
Gross Profit due to the low volume of production during this start up period
together with high fixed costs. Negative Gross Profits should shrink as the
Company increases production levels without a proportionate increase in costs
but will increase further should expenses increase or revenue decrease.
Operating Expenses were $519,224, $2,765,484 and $2,770,067 for the three and
twelve months ended March 31, 2009 and the period from February 5, 2008 (Date of
Inception) respectively. For each period, Operating Expenses consisted entirely
of Depreciation, and General and Administrative Expenses partially offset by net
interest income of $47,028, $172,767 and $172,767
respectively.  Included in Operating Expenses for the twelve months
ended March 31, 2009 and for the period from February 5, 2008 (Date of
Inception) until March 31, 2009 was $985,936 for the fair value of warrants
granted to consultants.
  16
 Table of Contents
 
 The
Company recorded a net loss of $518,787, $2,625,841 and $2,630,424 for the three
months ended March 31, 2009, the twelve months ended March 31, 2009 and the
period from February 5, 2008 (Date of Inception) until March 31, 2009
respectively. Excluding the fair value of the warrants granted to consultants
the loss would have been $1,639,905 and $1,644,488 for the twelve months ended
March 31, 2009 and the period from February 5, 2008 (Date of Inception) until
March 31, 2009 respectively.
 
 We
anticipate our operating expenses will increase as we undertake our plan of
operations. The increase will be attributable to the continued development of
our Products and Services, and the professional fees associated with our being a
reporting company under the Securities Exchange Act of 1934.
 
 Liquidity
and Capital Resources
 
 As of
March 31, 2009, working capital was $6,527,013 which was composed of $8,541,166
in current assets less $2,014,153  of current
liabilities.
 
 Operating
activities used $9,408,115 in cash for the twelve months ended March 31, 2009
and for the period from February 5, 2008 (Date of Inception) until March 31,
2009. The primary uses in Operating Activities were for the $8,206,990 increase
in the depository account, net losses of $2,625,841 and $2,630,424 respectively.
Investing activities used $5,388,840 and $5,738,840 in cash for the twelve
months ended March 31, 2009 and for the period from February 5, 2008 (Date of
Inception) until March 31, 2009 respectively. Funds were used to purchase
property and equipment. Financing Activities generated $14,832,500 and
$15,1976,650 in cash for the twelve months ended March 31, 2009,
and  for the period from February 5, 2008 (Date of Inception) until
march 31, 2009 respectively.
 
 As of
March 31, 2009, there was cash in the amount of $50,695, which we believe is not
sufficient cash to operate and achieve implementation of our full business plan.
The success of our business plan is contingent upon us obtaining additional
financing and establishing a consistent source of revenues. We intend to fund
operations through debt and/or equity financing arrangements, which may be
insufficient to fund our capital expenditures, working capital, or other cash
requirements. We do not have any formal commitments or arrangements for the
sales of stock or the advancement or loan of funds at this time. There can be no
assurance that such additional financing will be available to us on acceptable
terms, or at all.  If our attempts to raise additional capital are not
successful, then implementation of our business plan may be
delayed.
  17
 Table of Contents
 
 Off
Balance Sheet Arrangements
 
 As of
March 31, 2009, there were no off balance sheet arrangements.
 
 Going
Concern
  Our
financial statements are prepared using generally accepted accounting principles
applicable to a going concern which contemplates the realization of assets and
liquidation of liabilities in the normal course of business.  We have
limited revenues and have generated losses from operations.
 
 In order
to continue as a going concern and achieve a profitable level of operations, we
will need, among other things, additional capital resources and to develop a
consistent source of revenues.  Management’s plans include developing
and marketing a practical, economical and environmentally safe means of
disposing of and recycling certain polystyrene and expended polystyrene
products.
 
 Our
auditors have indicated that our ability to continue as a going concern is
dependent upon our ability to successfully accomplish the plan described in the
preceding paragraph and eventually attain profitable operations.  The
accompanying financial statements do not include any adjustments that might be
necessary if we are unable to continue as a going concern.
 
 Item8.   Financial Statements and Supplementary
Data
 
 See the
financial statements annexed to this annual report.
 
 Item9.   Changes In and Disagreements with
Accountants on Accounting and Financial Disclosure
 
 No events
occurred requiring disclosure under Item 304(b) of Regulation S-K during the
fiscal year ending March 31, 2009.  However, the audit report of our
auditor, Moore & Associates, Chartered, Independent Registered Public
Accounting Firm, for the year ended March 31, 2009, contains and uncertainty
about our ability to continue as a going concern.
  18
 Table of Contents
 
 Item 9A.  Controls and Procedures
 
 Management’s
Report On Internal Control Over Financial Reporting
 
 Management
is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rule 13a-15(f) under the Exchange Act.
This rule defines internal control over financial reporting as a process
designed by, or under the supervision of, the Company’s Chief Executive Officer
and Chief Financial Officer, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with U.S. GAAP. Our internal control over
financial reporting includes those policies and procedures that:
  •
              
              Pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect the transactions and dispositions of the assets of the
      Company;
  •
              
              Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with U.S. GAAP, and that
      receipts and expenditures of the Company are being made only in accordance
      with authorizations of management and directors of the
      Company; and
  •
              
              Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of the Company’s assets that
      could have a material effect on the financial
  statements.
 
 Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of our disclosure controls
and procedures as of March 31, 2009. Based on this evaluation, our management
has concluded that our disclosure controls and procedures adequately ensure that
information required to be disclosed in our reports filed or submitted under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms. The evaluation did not identify
any change in our internal control over financial reporting that occurred during
the fiscal year ended March 31, 2009 that has materially affected or is
reasonably likely to materially affect our internal control over such
reporting.
 
 Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act are recorded, processed, summarized and
reported, within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure.
 
 Limitations on the
Effectiveness of Internal Controls
 
 Our
management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will necessarily prevent all fraud and
material error. Our disclosure controls and procedures are designed to provide
reasonable assurance of achieving our objectives and our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures are effective at that reasonable assurance level.  Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within our company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
internal control. The design of any system of controls also is based in part
upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions. Over time, control may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate.
  19
 Table of Contents
 
 Item9B.  Other Information
 
 Purchase of Property at 3428
Browns Mill Road, Atlanta, Georgia.
 On
January 14, 2009, Blue Earth Solutions Georgia, Inc., a Georgia corporation (“BE
Georgia”) and our wholly owned subsidiary, entered into an agreement with
Stanley Konter, Rose Konter, Natalie Sarnat, Jonathan Sarnat, Elissa Konter
& Harris Konter to purchase the real property and improvements at 3428
Browns Mill Road, Atlanta, Georgia (the “Georgia Property”).  BE
Georgia provided $25,000 in an earnest money deposit in connection with the
purchase of the Georgia Property.  At this point in time, BE Georgia
is unable to complete the purchase of the Georgia Property.  Because
of BE Georgia’s failure to purchase the Georgia Property, the earnest money
deposit was divided between three parties on June 17, 2009.  BE
Georgia received $12,655.00.  The sellers received
$10,000.  The Gibson Law Firm, which was serving as the escrow agent,
received $2,345.00
 
 Purchase of 4210 B.F.
Goodrich Boulevard, Memphis, Tennessee
 On
January 14, 2009, Blue Earth Solutions Tennessee, Inc., a Tennessee corporation
and our wholly owned subsidiary (“BE Tennessee”), entered into an agreement with
The Guardian Life Insurance Company of America, a New York corporation, to
purchase the real property and improvements at 4210 B.F. Goodrich Boulevard,
Memphis, Tennessee (the “Tennessee Property”).  BE Tennessee provided
$25,000 in an earnest money deposit in connection with the purchase of the
Tennessee Property.  At this point in time, BE Tennessee is unable to
complete the purchase of the Tennessee Property.  Because the
transaction will not be closing, we anticipate that BE Tennessee will be
returned $17,800 of the earnest money deposit.  The other $7,200 that
comprised the initial deposit was spent on legal, surveying and title
fees.
 
 Purchase of American
Marketing & Sales, Inc.
 On March
17, 2009, we entered into a Stock Purchase Agreement (the “Agreement”) with
Datameg Corporation, a Delaware corporation (“Datameg”) to purchase American
Marketing & Sales, Inc., a Massachusetts corporation (“AMS”) from
Datameg.  The closing of the purchase of AMS was contingent upon the
satisfaction of conditions provided for in the Agreement.  This was
reported on a Form 8k on March 31, 2009.
 
 On June
24, 2009, the Board of Directors consented to the satisfaction of all of our
remaining obligations under the Agreement.  As a result, on June 30,
we completed the purchase of AMS, and it is now our wholly owned
subsidiary.
 
 20
 Table of Contents
 
 PART III
 
 Item10.  Directors, Executive Officers, and Corporate
Governance.
 
  The
following table sets forth information regarding the members of our board of
directors and our executive officers and other significant employees as of the
date of March 31, 2009.  All of our directors hold office until the
next annual meeting of stockholders and their successors are duly elected and
qualify. Executive officers serve at the request of the board of
directors.
 
 Name
                    Age
                    Office(s)
      HeldPatricia
      Cohen
                    55
                    CEO,
      Secretary, & DirectorPaul
      Slusarczyk
                    62
                    President,
      CFO & DirectorJames
      Cohen, Jr.
                    26
                    Vice
      President of Sales & DirectorDouglas
      Vaught
                    50
                    Vice
      President of Operations & DirectorSamir
      Burshan
                    43
                    DirectorRomulo
      Fernando Tachma Felix
                    45
                    DirectorPaul
      Pelosi, Jr.
                    40
                    DirectorThomas
      Aro
                    66
                    Director
 
 Set forth
below is a brief description of the background and business experience of our
current executive officers and directors.
 
 Patricia Cohen, 55,has been our Chief Executive Officer, Secretary and
Director since the Merger on May 16, 2008. Prior to joining Blue Earth Delaware,
Mrs. Cohen was retired, focusing on managing family assets. From 2000 until
2004, she was a partner in Westfield Financial. Prior to that she was a member
of the Board of Directors of Alpha Hospitality (1993-1997); the owner of The
Restaurant at 625 Main, Classic Catering, and La Dolce Sera Restaurant
(2000-2005); and a principal in Regent Air (1983-1987). Mrs. Cohen earned
Bachelor’s and Master’s degrees in Education from Long Island University,
graduating Summa Cum Laude.
  Paul D. Slusarczyk, 62, has been our President,
Chief Financial Officer, and Director since the Merger on May 16,
2008.  Prior to joining Blue Earth Solutions, Paul spent one year as
Vice President of HealthFair, a mobile medical screening company designing
purchasing policies and focused heavily on vehicle preventative
maintenance.  Between 2002 and 2006, he was CFO and a member of the
board of directors of San Ignacio Development Company, focusing on the
development of a major resort complex on the west coast of Mexico near the City
of Los Mochis.  He was Senior Vice President of Food Services of the
Americas, Inc., the White Castle Hamburger restaurant franchisee in Mexico, from
November 1999 until March of 2001 and a member of its Board of Directors from
November 1995 until March of 2001.  He served as its Chairman of the
Board and President from its inception in November 1995 until November 1999. He
served as Chairman of the Board of White Castle de Mexico, S.A. de C.V. from
September 1994 until December 1997.  From 1993 until joining Food
Services of the Americas, Inc. upon its formation, Mr. Slusarczyk was Managing
Director of Grupo Mexicano de Video, S.A. de C.V. (“Grupo Mexicano”), a master
Blockbuster franchisee for Mexico.  From 1987 through 1992, Mr.
Slusarczyk was the Managing Director of Blockbuster Video, a wholly-owned
subsidiary of Blockbuster Entertainment.  From 1983 until 1987, Mr.
Slusarczyk owned and operated a chain of video stores that was subsequently
acquired by Blockbuster Entertainment.  In addition, Mr. Slusarczyk
was Senior Director of Finance for Waste Management, Inc., a corporation engaged
in international waste disposal, from 1971 until 1983 and was part of a team
that built a city to house 4,000 workers.
  21
 Table of Contents
 
 James Cohen, Jr., 26, is a
member of the Board of Directors and the vice president of sales for Blue Earth
Solutions, Inc.  He has held these positions since August 25,
2008.  He is the son of our CEO, Patricia Cohen.  From
2003-2008 Mr. Cohen was involved as a Real Estate Agent and owner of IDX Realty
Inc. and also opened a net branch mortgage company with Christian Financial.
Previously, Mr. Cohen served as General Manager of both La Dolce Sera Restaurant
(2004-2005) and Classic Catering (2003-2005). He graduated from Florida State
University in 2003 and holds a bachelors degree in Economics.
 
 Douglas Vaught, 50, has been
employed since September 2008 as the Vice President of Operations of Blue Earth
Solutions where his responsibilities include overseeing the installation of the
processing equipment and set up of the Clermont facility.  Mr Vaught was
also appointed to the board of directors on February 4, 2009.  From
February 2004 to September 2008, he was employed as the President of DSV Group,
Inc. where his responsibilities included construction consulting and inspections
for commercial and residential building projects.  He has an extensive
background in industrial processing and installation of processing
equipment.
 
 Samir Burshan, 43, has been a
member of the Board of Directors since November 4, 2008.  He has been
employed as the Chairman and Managing Member of PrismOne Group LLC, a Florida
limited liability company, a Florida based provider of networking related
equipment and services, since its inception in December 2006. Previously, from
2004 until 2008, Mr. Burshan served as Managing Member of Step2 TechKnowledgies
Group LLC and, from 1998 until 2008, as President of Step2 Technologies,
Inc.  Mr. Burshan is a graduate of Washington University in St. Louis,
where he earned a Bachelor of Arts degree in Architecture (1987), a Masters
Degree in Architecture (1989), and a Masters Degree in Construction
Administration (1989).
 
 Romulo Fernando Tachma Felix,
45, has been a member of the Board of Directors since November 18,
2008.  He has been self-employed since August 2000 in Los Mochis,
Mexico, focusing in the agricultural and retail gas station businesses. 
Previously, from 1995 until 2000, Mr. Felix served as Corporate MIS Director of
Coca-Cola Bottling Group in Tijuana, Mexico. Mr. Felix is a graduate of ITESM
Campus Monterrey in Monterrey, Mexico, where he earned a degree in Computer
Science in 1988.
 
 Paul Pelosi, Jr., 40, has been
a member of the Board of Directors since November 28, 2008.  He
currently serves as an advisor to the Director of NASA Ames Research Center
since February 2008 in Moffett Field, California, working on internal policies
to define, document and communicate environmental effects regarding the
implementation of sustainability development plans, recycling programs,
environmental clean-up and bio-fuel utilization.  He is also a current
board member of Airpatrol Corporation in Burnaby, Canada and Astrobotic
Technology, Inc. located in Pittsburgh, Pennsylvania.  Mr. Pelosi is a
graduate of Georgetown University where he earned his Bachelor of Arts degree in
History (1991), a Law Degree specializing in International Business (1994) and a
Masters in Business Administration (1995).
 
 Thomas Aro, 66, has been a
member of the Board of Directors since November 4, 2008.  He was
employed by a publicly reporting gaming company, Empire Resorts, Inc., a
Delaware corporation, from 1993 until his retirement in 2008.  At the
time of his retirement, Mr. Aro served as Empire’s Executive Vice President and
as the President and Chief Operating Officer of its gaming
subsidiaries.  Mr. Aro graduated from the University of Arizona with a
Bachelors of Science degree in Accounting, awarded in 1964.
  22
 Table of Contents
 
 Family
Relationships
 
 There are
no family relationships between or among the directors, executive officers or
persons nominated or chosen by us to become directors or executive officers with
the exception of Patricia Cohen and James Cohen, Jr., who are mother and
son.
 
 Involvement
in Certain Legal Proceedings
 
 Except
for the litigation involving Harvey Katz, which is further described in Item 2,
to  the best of our knowledge, during the past five years, none of the
following  occurred  with  respect  to a
present or former director, executive officer, or  employee: (1) any
bankruptcy petition filed by or against any business  of which such
person was a general partner or executive officer either
at  the  time  of the bankruptcy or within two
years prior to that time; (2) any conviction in a
criminal  proceeding  or  being subject to a
pending criminal
proceeding  (excluding  traffic  violations and
other minor offenses); (3) being subject  to  any order,
judgment or decree, not subsequently reversed, suspended
or  vacated,  of  any  court  of  competent  jurisdiction,  permanently  or
temporarily enjoining, barring, suspending or otherwise limiting his or her
involvement in  any  type of business, securities or banking
activities; and (4) being found
by  a  court  of  competent  jurisdiction  (in  a  civil
action), the SEC or the
Commodities  Futures  Trading  Commission  to  have  violated
a federal or state securities or commodities law, and the judgment has not been
reversed, suspended or vacated.
 
 Audit
Committee
 
 We do not
have a separately-designated standing audit committee. The entire Board of
Directors performs the functions of an audit committee, but no written charter
governs the actions of the Board when performing the functions of what would
generally be performed by an audit committee. The Board approves the selection
of our independent accountants and meets and interacts with the independent
accountants to discuss issues related to financial reporting. In addition, the
Board reviews the scope and results of the audit with the independent
accountants, reviews with management and the independent accountants our annual
operating results, considers the adequacy of our internal accounting procedures
and considers other auditing and accounting matters including fees to be paid to
the independent auditor and the performance of the independent
auditor.
 
 Nomination
Committee
 
 Our Board
of Directors does not maintain a nominating committee. As a result, no written
charter governs the director nomination process. Our size and the size of our
Board, at this time, do not require a separate nominating
committee.
  23
 Table of Contents
 
 When
evaluating director nominees, our directors consider the following
factors:
 
 ·
              The
      appropriate size of our Board of
Directors;
 ·
              Our
      needs with respect to the particular talents and experience of our
      directors;
 ·
              The
      knowledge, skills and experience of nominees, including experience in
      finance, administration or public service, in light of prevailing business
      conditions and the knowledge, skills and experience already possessed by
      other members of the Board;
 ·
              Experience
      in political affairs;
 ·
              Experience
      with accounting rules and practices;
and
 ·
              The
      desire to balance the benefit of continuity with the periodic injection of
      the fresh perspective provided by new Board
  members.
 
 Our goal
is to assemble a Board that brings together a variety of perspectives and skills
derived from high quality business and professional experience. In doing so, the
Board will also consider candidates with appropriate non-business
backgrounds.
 
 Other
than the foregoing, there are no stated minimum criteria for director nominees,
although the Board may also consider such other factors as it may deem are in
our best interests as well as our stockholders. In addition, the Board
identifies nominees by first evaluating the current members of the Board willing
to continue in service. Current members of the Board with skills and experience
that are relevant to our business and who are willing to continue in service are
considered for re-nomination. If any member of the Board does not wish to
continue in service or if the Board decides not to re-nominate a member for
re-election, the Board then identifies the desired skills and experience of a
new nominee in light of the criteria above. Current members of the Board are
polled for suggestions as to individuals meeting the criteria described above.
The Board may also engage in research to identify qualified individuals. To
date, we have not engaged third parties to identify or evaluate or assist in
identifying potential nominees, although we reserve the right in the future to
retain a third party search firm, if necessary. The Board does not typically
consider shareholder nominees because it believes that its current nomination
process is sufficient to identify directors who serve our best
interests.
 
 Section
16(a) Beneficial Ownership Reporting Compliance
 
 The
Company’s Form 10k for the fiscal year ending March 31, 2008 had Harvey Katz
listed as the beneficial owner of 3,780,000 shares of the Company’s common
stock.  To the best of our information, between late October 29, 2008,
and December 12, 2008, Harvey Katz, in three separate transactions, sold a total
of 300,000 shares of the Company’s common stock in a private sale to Caicedo
Resources.  Between December 1, 2008 and December 16, 2008, in ten
separate transactions, HarveyKatz sold a total of 161,370 shares Company’s
common stock through Scottsdale Advisors, Inc., to the best of our
information.  To the best of our information, the Company believes
that Harvey Katz was the beneficial owner of more than 10% of the outstanding
common stock of the Company at the time of each sale.  Harvey Katz did
not file reports required by Section 16(a) in conjunction with any of the
aforementioned sales.  Except for Harvey Katz’s repeated failure to
file, to the best of our knowledge, no officer, director or beneficial owners of
more than ten percent of our common stock failed to timely file reports required
by Section 16(a) during the most recent fiscal year or prior
years.
  24
 Table of Contents
 
 Code
of Ethics Disclosure
 
 As of
March 31, 2009, we had not adopted a Code of Ethics for Financial Executives,
which include our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions.
 
 Item11.  Executive Compensation
 
 Summary
Compensation Table
 
 The table
below summarizes all compensation awarded to, earned by, or paid to both to our
officers and to our directors for all services rendered in all capacities to us
for our fiscal years ended March 31, 2009 and 2008.
 
 SUMMARY
      COMPENSATION TABLEName
                          and
                          principal
                          position
                        Year
                        Salary($)
                        Bonus
                          ($)
                        Stock
                          Awards
                          ($)
                        Option
                          Awards
                          ($)
                        Non-Equity
                          Incentive
      Plan
                          Compensation
                          ($)
                        Nonqualified
                          Deferred
                          Compensation
                          Earnings
      ($)
                        All
      Other
                          Compensation
                          ($)
                        Total
                          ($)Patricia
      Cohen, CEO, Secretary, and Chairman
                        2009
                          2008
                        $67,000
                          0
                        0
                          0
                        0
                          0
                        0
                          0
                        0
                          0
                        0
                          0
                        0
                          0
                        $67,000
                          0Paul
      Slusarczyk, President and CFO
                        2009
                          2008
                        $60,000
                          0
                        0
                          0
                        0
                          0
                        0
                          0
                        0
                          0
                        0
                          0
                        0
                          0
                        $60,000
                          0James
      Cohen, Jr., Vice President
                        2009
                          2008
                        $67,708
                          0
                        0
                          0
                        0
                          0
                        0
                          0
                        0
                          0
                        0
                          0
                        0
                          0
                        $67,708
                          0Randy
      Weston, Former President and CEO
                        2009
                          2008
                        0
                          0
                        0
                          0
                        0
                          0
                        0
                          0
                        0
                          0
                        0
                          0
                        0
                          0
                        0
                          0
 
 
 Narrative
Disclosure to the Summary Compensation Table
 
 Patricia
Cohen’s employment agreement provided her a $240,000 salary for the fiscal year
ending March 31, 2009.  However, Mrs. Cohen waived her salary for the
two first fiscal quarters.  As a result of this waiver, Mrs. Cohen’s
salary for the year was $127,000.
  25
 Table of Contents
 
 Mrs.
Cohen has not collected the entire $127,000 salary due her, as she agreed to
defer her salary for the fourth quarter.  Because of this deferral,
she has collected only $67,000 of salary from us. The remaining $60,000 in
salary due Mrs. Cohen will be paid when we feel we possess sufficient capital
reserves to pay her.
 
 Paul
Slusarcyzk’s employment agreement provided him a $240,000 salary for the fiscal
year ending March 31, 2009.  However, Mr. Slusarcyzk waived his salary
for the two first fiscal quarters.  As a result of this waiver, Mr.
Slusarcyzk’s salary for the year was $120,000.
  Mr.
Slusarcyzk has not collected the entire $120,000 salary due him, as he agreed to
defer his salary for the fourth quarter.  Because of this deferral, he
has collected only $60,000 of salary from us.  The remaining $60,000
in salary due Mr. Slusarcyzk will be paid when we feel we possess sufficient
capital reserves to pay him.
 
 James
Cohen, Jr. has not collected his entire $72,916.62 salary, as he agreed to defer
$5,208 of the salary due him.  The remaining monies will be paid to
Mr. Cohen when we feel we possess sufficient capital reserves to pay
him.
 
 We have a
written employment contract with Mrs. Cohen that retains her through February of
2013. According to the terms of the agreement, Mrs. Cohen will receive a
starting base salary of $240,000 per year, with a 20% increase each year on the
anniversary of her employment agreement. Mrs. Cohen may also receive an annual
bonus, payable quarterly equal to 1% of all gross revenues, and will be entitled
to participate in any standard employee benefit plans, medical insurance plans,
life insurance plans, disability income plans, retirement plans, vacation plans,
expense reimbursement plans and other benefit plans which we may from time to
time have in effect for all or most of our senior executives.
 
 We also
have an employment agreement in place with Mr. Slusarczyk that retains him
through February of 2013. According to the terms of the agreement, Mr.
Slusarczyk will receive a starting base salary of $240,000 per year, with a 20%
increase each year on the anniversary of his employment agreement. Mr.
Slusarczyk may also receive an annual bonus, payable quarterly equal to 1% of
all gross revenues, and will be entitled to participate in any standard employee
benefit plans, medical insurance plans, life insurance plans, disability income
plans, retirement plans, vacation plans, expense reimbursement plans and other
benefit plans which we may from time to time have in effect for all or most of
our senior executives.
 
 Stock
Option Grants
 
 We have
not granted any stock options to the executive officers or directors since our
inception.
 
 Stock
Option Plans
 
 We did
not have a stock option plan in place as of March 31, 2009, and we have not
adopted one subsequent to the reporting period as of the date of this report
filed on form 10-K.
  26
 Table of Contents
  Outstanding
Equity Awards at Fiscal Year-End
 
 The table
below summarizes all unexercised options, stock that has not vested, and equity
incentive plan awards for each named executive officer as of March 31,
2009.
 
 OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR-ENDOPTION
      AWARDS
                            STOCK
      AWARDSName
                            Number
      of
                              Securities
                              Underlying
                              Unexercised
                              Options
                              (#)
                              Exercisable
                            Number
      of
                              Securities
                              Underlying
                              Unexercised
                              Options
                              (#)
                              Unexercisable
                            Equity
                              Incentive
                              Plan
                              Awards:
                              Number
      of
                              Securities
                              Underlying
                              Unexercised
                              Unearned
                              Options
                              (#)
                            Option
                              Exercise
                              Price
                              ($)
                            Option
                              Expiration
                              Date
                            Number
                              of
                              Shares
                              or
      Units
                              of
                              Stock
      That
                              Have
                              Not
                              Vested
                              (#)
                            Market
                              Value
                              of
                              Shares
                              or
                              Units
                              of
                              Stock
                              That
                              Have
                              Not
                              Vested
                              ($)
                            Equity
                              Incentive
                              Plan
                              Awards:
                              Number
                              of
                              Unearned
                              Shares,
                              Units
      or
                              Other
                              Rights
                              That
      Have
                              Not
                              Vested
                              (#)
                            Equity
                              Incentive
                              Plan
                              Awards:
                              Market
      or
                              Payout
                              Value
      of
                              Unearned
                              Shares,
                              Units
      or
                              Other
                              Rights
                              That
                              Have
      Not
                              Vested
                              (#)Patricia
      Cohen, CEO, Secretary, and Chairman
                            -
                            -
                            -
                            -
                            -
                            -
                            -
                            -
                            -Paul
      Slusarczyk, President and CFO
                            -
                            -
                            -
                            -
                            -
                            -
                            -
                            -
                            -James
      Cohen, Jr., Vice PresidentRandy
      Weston, Former President and CEO
                            -
                            -
                            -
                            -
                            -
                            -
                            -
                            -
                            -
 
 27
 Table of Contents
  Compensation
of Directors
 
 The table
below summarizes all compensation of our directors as of March 31,
2009.
 
 DIRECTOR
      COMPENSATIONName
                                    Fees
      Earned or
                                      Paid
      in
                                      Cash
                                      ($)
                                    Stock
      Awards
                                      ($)
                                    Option
      Awards
                                      ($)
                                    Non-Equity
                                      Incentive
                                      Plan
                                      Compensation
                                      ($)
                                    Non-Qualified
                                      Deferred
                                      Compensation
                                      Earnings
                                      ($)
                                    All
                                      Other
                                      Compensation
                                      ($)
                                    Total
                                      ($)Patricia
      Cohen, CEO, Secretary, and Chairman
                                    -
                                    -
                                    -
                                    -
                                    -
                                    -
                                    -Paul
      Slusarczyk, President, CFO, and Director
                                    -
                                    -
                                    -
                                    -
                                    -
                                    -
                                    -James
      Cohen, Jr., Vice President and Director
                                    -
                                    -
                                    -
                                    -
                                    -
                                    -
                                    -Douglas
      Vaught, Vice President and Director
                                    -
                                    -
                                    -
                                    -
                                    -
                                    -
                                    -Samir
      Burshan, Director
                                    -
                                    -
                                    -
                                    -
                                    -
                                    -
                                    -Paul
      Pelosi, Jr., Director
                                    -
                                    -
                                    -
                                    -
                                    -
                                    -
                                    -Romulo
      Fernando Tachma Felix, Director
                                    -
                                    -
                                    -
                                    -
                                    -
                                    -
                                    -Thomas
      Aro, Director
                                    -
                                    -
                                    -
                                    -
                                    -
                                    -
                                    -Randy
      Weston, Former Director
                                    -
                                    -
                                    -
                                    -
                                    -
                                    -
                                    -
 
 Narrative
Disclosure to the Director Compensation Table
 
 We do not
pay any compensation to our directors at this time. However, we reserve the
right to compensate our directors in the future with cash, stock, options, or
some combination of the above.
  Employment
Agreements
 
 We have
written employment contracts with both of our officers and other key employees.
We have an employment agreement in place with Mrs. Cohen that retains her
through February 4, 2013. According to the terms of the agreement, Mrs. Cohen
will receive a starting base salary of $240,000 per year, with a 20% increase
each year on the anniversary of her employment agreement. Mrs. Cohen may also
receive an annual bonus, payable quarterly equal to 1% of all gross revenues,
and will be entitled to participate in any standard employee benefit plans,
medical insurance plans, life insurance plans, disability income plans,
retirement plans, vacation plans, expense reimbursement plans and other benefit
plans which we may from time to time have in effect for all or most of our
senior executives.
 
 We also
have an employment agreement in place with Mr. Slusarczyk that retains him
through February 4, 2013. According to the terms of the agreement, Mr.
Slusarczyk will receive a starting base salary of $240,000 per year, with a 20%
increase each year on the anniversary of his employment agreement. Mr.
Slusarczyk may also receive an annual bonus, payable quarterly equal to 1% of
all gross revenues, and will be entitled to participate in any standard employee
benefit plans, medical insurance plans, life insurance plans, disability income
plans, retirement plans, vacation plans, expense reimbursement plans and other
benefit plans which we may from time to time have in effect for all or most of
our senior executives.
  28
 Table of Contents
 
 Item12.  Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder
Matters
 
 The
following table sets forth certain information known to us with respect to the
beneficial ownership of our Common Stock as of the effective date of the Merger
by (1) all persons who are beneficial owners of 5% or more of our voting
securities, (2) each director, (3) each executive officer, and (4) all directors
and executive officers as a group. The information regarding beneficial
ownership of our common stock has been presented in accordance with the rules of
the Securities and Exchange Commission. Under these rules, a person may be
deemed to beneficially own any shares of capital stock as to which such person,
directly or indirectly, has or shares voting power or investment power, and to
beneficially own any shares of our capital stock as to which such person has the
right to acquire voting or investment power within 60 days through the exercise
of any stock option or other right. The percentage of beneficial ownership as to
any person as of a particular date is calculated by dividing (a) (i) the number
of shares beneficially owned by such person plus (ii) the number of shares as to
which such person has the right to acquire voting or investment power within 60
days by (b) the total number of shares outstanding as of such date, plus any
shares that such person has the right to acquire from us within 60 days.
Including those shares in the tables does not, however, constitute an admission
that the named stockholder is a direct or indirect beneficial owner of those
shares. Unless otherwise indicated, each person or entity named in the table has
sole voting power and investment power (or shares that power with that person’s
spouse) with respect to all shares of capital stock listed as owned by that
person or entity.
 
 Except as
otherwise indicated, all Shares are owned directly and the percentage shown is
based on 31,632,602 Shares of Common Stock issued and outstanding as of June 25,
2009. Addresses for all of the individuals listed in the table below are c/o
Blue Earth Solutions, Inc., 13511 Granville Ave., Clermont, FL
34711.
 
 Title
      of class
                                                                      Name
      and address
                                                                        of
      beneficial owner (1)
                                                                      Amount
      of
                                                                        beneficial
      ownership
                                                                      Percent
                                                                        of
      class(2)Current
      Executive Officers & Directors:Common
                                                                      Patricia
      Cohen
                                                                      9,064,506
      Shares
                                                                      28.66%Common
                                                                      Paul
      Slusarczyk
                                                                      8,914,506
      Shares
                                                                      28.18%Common
                                                                      James
      Cohen, Jr.
                                                                      1,377,150
      Shares(3)
                                                                      4.35%Common
                                                                      Douglas
      Vaught
                                                                      225,000
      Shares
                                                                      0.71%Common
                                                                      Samir
      Burshan
                                                                      30,000
      shares(6)
                                                                      0.09%Common
                                                                      Romulo
      Fernando Tachma Felix
                                                                      0
      Shares
                                                                      0.00%Common
                                                                      Paul Pelosi, Jr.
                                                                      0
      Shares
                                                                      0.00%Common
                                                                      Thomas
      Aro
                                                                      0
      Shares
                                                                      0.00%Total
      of All Current Directors and Officers:More
      than 5% Beneficial OwnersCommon
                                                                      Harvey
      Katz
                                                                      3,318,630(4)
                                                                      10.49%Common
                                                                      Claudia
      and Nic Iovino
                                                                      2,420,000(5)
                                                                      9.35%
  (1)
                                                                        Includes
      shares held directly with sole voting and investment power, unless
      otherwise indicated.
 (2)
                                                                          Includes
      shares subject to stock options and warrants that are held by the
      individual and exercisable within 60 days.(3)
                                                                          Mr.
      James E. Cohen, Jr. directly beneficially owns 1,147,000 shares of the
      Issuers common stock and 132,000 shares are held indirectly by JDG Group,
      Inc., which is controlled by Mr. Cohen.(4)
                                                                          The
      Company reported Harvey Katz as being the beneficial owner of 3,780,000
      shares of the Company’s common stock in the Company’s annual report filed
      for the fiscal year ending March 31, 2008.  In connection with a
      case in the Eighth Judicial District Court in and for Clark County,
      Nevada, Harvey Katz acknowledged selling 461,370 shares of common stock in
      an affidavit dated January 4, 2009.  The Court enjoined Harvey
      Katz from selling any additional shares of the Company’s common stock
      until May 20, 2009.  Therefore the Company assumes that as of
      May 20, 2009, Harvey Katz held 3,318,630 shares.(5)
                                                                          The
      Company reported Claudia and Nic Iovino as being the beneficial owners of
      2,520,000 shares of the Company’s common stock in the Company’s annual
      report filed for the fiscal year ending March 31, 2008.  In an
      affidavit dated January 4, 2009 that was filed with the Eighth Judicial
      District Court in and for Clark County, Nevada, Harvey Katz stated that he
      believed the Iovinos sold approximately 100,000 shares of the Company’s
      common stock in 2008.  The Court enjoined the Iovino’s from
      selling any additional shares of the Company’s common stock until May 20,
      2009.  Therefore the Company assumes that as of May 20, 2009,
      the Iovino’s  held 2,420,000 shares.(6)
                                                                          Held
      in the name of Burshan LLC, which Mr. Burshan
  controls.
  29
 Table of Contents
 
 Item13.   Certain Relationships and Related
Transactions, and Director Independence
 
 Loans of
Monies.
 
 JEC
Family LP, loaned a total of $498,119.17 to us between August 2008 and June
2009.  All of the loans are accruing interest at 8%
annually.  As of June 30, 2009, the current accrued interest on the
loans is $14,414.
 
 Attached
as Exhibit 10.1 is the promissory note evidencing the initial loan to us from
the limited partnership and a schedule reflecting the additional loans to us by
the limited partnership through May 29, 2009.  The attached note and
schedule do not reflect the additional $36,000 that was loaned to us in June by
the limited partnership.
 
 There
have not been any payments of interest or principal on the loaned
monies.  We are currently delinquent in making interest
payments.  We were obligated to begin making interest payments on May
15, 2009 and are obligated to make a payment of the interest due and owing on
the 15th of
every month thereafter until April 15, 2011 when the remaining principle and
interest on the note comes due.
 
 As a
result of our failure to make interest payments, we are technically in default
under the terms of the note.  However, we have not been declared in
default by the note’s holder.  A $250 late fee is incurred for
payments due and owing but not made within 10 days of the due
date.  Additionally, failure to make a payment due under the note
results in all of the principal and interest outstanding becoming immediately
due and owing.  As of the date of this filing, the holder of the note
has not assessed a late fee or demanded payment of all monies due and
owing.
 
 The
General Partner of JEC Family LP is JEC Corp.  James Cohen, Sr., is
the President of JEC Corp., and the spouse of Patricia Cohen, our CEO,
Secretary, Director as well as the father of James Cohen, Jr., our Vice
President and Director.
  30
 Table of Contents
 
 Guarantee, Loan of Monies
and Sales Commission.
 
 We
purchased real property and improvements for use as our headquarters for a total
purchase price of $1.7 million.  We executed a mortgage back in favor
of the seller of that property in the principal amount of $1,049,000, due in
three years, with interest only payments due monthly until maturity in the
amount of $6,119.17.  The mortgage was personally guaranteed by our
CEO, Patricia Cohen, and her spouse.
 
 We
borrowed the balance of the funds necessary to close on this real property from
JDC Group, a Florida corporation, controlled by Jim Cohen, Jr.  In
consideration, we executed a promissory note in favor of JDC Group in the
principal amount of $671,396.62, due on demand, which bears simple interest at a
rate of 7% per annum until paid.  The borrowed funds included that
portion of the real estate commission owed Jim Cohen, Jr., $51,000, to which he
was entitled for acting as our real estate agent in connection with the purchase
of the real property.  Jim Cohen, Jr., is the adult son of our CEO,
Patricia Cohen.  Subsequent to these events James Cohen, Jr., became
our VP of Sales and a member of our Board of Directors.  The loan
guarantee, promissory note and real estate commission were reported in a Form 8k
filed on August 13, 2008.
 
 On August
29, 2008 we completed and closed our private offering of our newly created
Series C Preferred Stock.  In connection with this offering, we issued
Series C Preferred Stock to JDC Group, Inc., in consideration for their
cancelling a $700,000 promissory note owed to JDC Group, Inc.  JDC
Group, Inc. is a Florida corporation controlled by James Cohen, Jr., a member of
our Board of Directors, our VP of Sales and the adult son of our CEO, Patricia
Cohen.  This event was reported on a Form 8k filed on September 4,
2008.
 
 Except as
set forth above, none of our directors or executive officers, nor any proposed
nominee for election as a director, nor any person who beneficially owns,
directly or indirectly, shares carrying more than 5% of the voting rights
attached to all of our outstanding shares, nor any members of the immediate
family (including spouse, parents, children, siblings, and in-laws) of any of
the foregoing persons has any material interest, direct or indirect, in any
transaction over the last two years or in any presently proposed transaction
which, in either case, has or will materially affect us.
  Item14.   Principal Accountant Fees and
Services
 
 Below is
the table of Audit Fees (amounts in US$) billed by our auditor in connection
with the audit of the Company’s annual financial statements for the years
ended:
 
 Financial
      Statements for the Year Ended March 31
                        Audit
      Services
                        Audit
      Related Fees
                        Tax
      Fees
                        Other
      Fees2009
                        $23,437
                        $0
                        $0
                        $02008
                        $3,500
                        $0
                        $0
                        $02007
                        $0
                        $0
                        $0
                        $0
  31
 Table of Contents
  PART IV
 
 Item15.   Exhibits, Financial Statements
Schedules
 
 Index
to Financial Statements Required by Article 8 of Regulation S-X
 
 Audited
      Financial Statements:F-1
              Report of Independent Registered Public Accounting
      Firm;F-2
              Consolidated   Balance Sheet as of March 31,
      2009 Pro Forma Consolidated Balance Sheet as of March 31,
      2008;F-3
              Statements of Operations for the period from Inception
      (February 5, 2008) through March 31, 2009 and 2008 and Pro Forma
      Consolidated Statements of Operations for the three month period ending
      March 31, 2008;F-4
              Statement of Stockholders’ Equity;F-5
              Statements of Cash Flows for the period from Inception
      (February 5, 2008) through March 31, 2009 and 2008;F-6
              Notes to Consolidated Financial
    Statements.
 
 Exhibit
      Number
                              Description3.1
                              Articles
      of Incorporation, as amended (1)3.2
                              Bylaws,
      as amended (1)10.1
                              Promissory Note dated August 15,
  200823.1
                              Consent of Moore & Associates, Chartered,
      Independent Registered Public Accounting Firm31.1
                              Certification of Chief Executive Officer pursuant to
      Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 200231.2
                              Certification of Chief Financial Officer pursuant to
      Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 200232.1
                              Certification of Chief Executive Officer and Chief
      Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
      to Section 906 of the Sarbanes-Oxley Act of
  2002
 
 (1)
              Incorporated
      by reference to the Registration Statement on SB-2 filed with the
      Securities and Exchange Commission on February 5, 2007.  On May
      16, 2008, we further amended our articles and bylaws solely to reflect the
      change in the Company’s name to “Blue Earth Solutions,
    Inc.”


32
 Table of Contents




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.





Blue
Earth Solutions, Inc.





By:
            /s/
      Patricia CohenPatricia
      Cohen
              Chief
      Executive Officer, DirectorJuly
      13, 2009








By:
            /s/
      Paul SlusarczykPaul
      Slusarczyk
              Chief
      Financial Officer, DirectorJuly
      13, 2009




33
 Table of Contents


MOORE& ASSOCIATES, CHARTERED
 ACCOUNTANTS AND
ADVISORS
 PCAOB REGISTERED
 
 REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 To
the Board of Directors
 Blue
Earth Solutions, Inc.
 (A
Development Stage Company)
 
 We have
audited the accompanying balance sheets of Blue Earth Solutions, Inc. (A
Development Stage Company) as of March 31, 2009 and March 31, 2008, and the
related statements of operations, stockholders’ equity (deficit) and cash flows
for the year ended March 31, 2009, from inception on February 5, 2008 through
March 31, 2008 and from inception on February 5, 2008 through March 31, 2009.
These financial statements are the responsibility of the Company’s
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.
 
 We
conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits 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 Blue Earth Solutions, Inc. (A
Development Stage Company) as of March 31, 2009 and March 31, 2008, and the
related statements of operations, stockholders’ equity (deficit) and cash flows
for the year ended March 31, 2009, from inception on February 5, 2008 through
March 31, 2008 and from inception on February 5, 2008 through March 31, 2009, in
conformity with accounting principles generally accepted in the United States of
America.
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  As discussed in Note 5 to the
financial statements, the Company has accumulated deficit of $2,630,424 as of
March 31, 2009, which raises substantial doubt about its ability to continue as
a going concern.  Management’s plans concerning these matters are also
described in Note 5.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
 
 /s/
Moore & Associates, Chartered
 Moore
& Associates Chartered
 Las
Vegas, Nevada
 June 23,
2009
 
 
 6490 West Desert Inn Rd, Las
Vegas, NV 89146 (702) 253-7499 Fax (702)
253-7501
 F-1
 Table of Contents
 BLUE
EARTH SOLUTIONS, INC.
 (A Development Stage Company) Balance Sheets
 ASSETSMarch
      31,
                                                                  2009
                                                              
                                                              March
      31,
                                                                  2008CURRENT
      ASSETSCash
      and cash equivalents
                                                              $
                                                              50,695
                                                              
                                                              $
                                                              15,150Depository
      funds
                                                              
                                                              8,206,990
                                                              
                                                              
                                                              -Accounts
      receivable
                                                              
                                                              10,907
                                                              
                                                              
                                                              -Prepaid
      expenses
                                                              
                                                              41,421
                                                              
                                                              
                                                              -Inventory
                                                              
                                                              231,153
                                                              
                                                              
                                                              -Total
      Current Assets
                                                              
                                                              8,541,166
                                                              
                                                              
                                                              15,150PROPERTY
      AND EQUIPMENT, net
                                                              
                                                              6,910,347
                                                              
                                                              
                                                              545,417OTHER
      ASSETSDeposits
                                                              
                                                              65,555
                                                              
                                                              
                                                              -TOTAL
      ASSETS
                                                              $
                                                              15,517,068
                                                              
                                                              $
                                                              560,567LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT
      LIABILITIESAccounts
      payable and accrued expenses
                                                              $
                                                              1,551,653
                                                              
                                                              $
                                                              -Notes
      payable - related parties
                                                              
                                                              462,500
                                                              
                                                              
                                                              200,000Total
      Current Liabilities
                                                              
                                                              2,014,153
                                                              
                                                              
                                                              200,000LONG-TERM
      LIABILITIESNotes
      payable
                                                              
                                                              1,049,000
                                                              
                                                              
                                                              -Total
      Current Liabilities
                                                              
                                                              3,063,153
                                                              
                                                              
                                                              200,000STOCKHOLDERS'
      EQUITYPreferred
      stock, Series A, $0.001 par value, 10,000,000 shares
      authorized,
                                                                -0-
      and 400,000 shares issued and outstanding
                                                              
                                                              -
                                                              
                                                              
                                                              400Preferred
      stock, Series B, $0.001 par value, 5,000,000 shares
      authorized,
                                                                -0-
      and 36,500 shares issued and outstanding,
      respectively
                                                              
                                                              -
                                                              
                                                              
                                                              37Preferred
      stock, Series C, $0.001 par value, 5,000,000 shares
      authorized,
                                                                14,130
      and no shares issued and outstanding, respectively
                                                              
                                                              14
                                                              
                                                              
                                                              -Common
      stock, $0.001 par value, 100,000,000 shares authorized,
                                                                32,025,300
      and 7,000,000 shares issued and outstanding,
    respectively
                                                              
                                                              32,025
                                                              
                                                              
                                                              7,000Additional
      paid-in capital
                                                              
                                                              15,052,300
                                                              
                                                              
                                                              357,713Deficit
      accumulated during the development stage
                                                              
                                                              (2,630,424)
                                                              
                                                              
                                                              (4,583)Total
      Stockholders' Equity
                                                              
                                                              12,453,915
                                                              
                                                              
                                                              360,567TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                                                              $
                                                              15,517,068
                                                              
                                                              $
                                                              560,567




The
accompanying notes are an integral part of these financial
statements.


F-2
 Table of Contents


BLUE
EARTH SOLUTIONS, INC. (A Development Stage Company) Statements of Operations
  For
      the Year Ended
                                                                            March 31, 2009
                                                                    
                                                                    From
      Inception
                                                                              onFebruary 5,
                                                                              2008 Through
                                                                              March 31,
      2008
                                                                    
                                                                    From
      Inception
                                                                              on February 5,
                                                                              2008 Through
                                                                              March 31,
      2009REVENUES
                                                                    $
                                                                    31,867
                                                                    
                                                                    $
                                                                    -
                                                                    
                                                                    $
                                                                    31,867COST
      OF SALES
                                                                    
                                                                    64,991
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    64,991Gross
      Profit (Loss)
                                                                    
                                                                    (33,124)
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    (33,124)OPERATING
      EXPENSESDepreciation
      expense
                                                                    
                                                                    72,910
                                                                    
                                                                    
                                                                    4,583
                                                                    
                                                                    
                                                                    77,493Warrant
      consulting expense
                                                                    
                                                                    985,936
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    985,936General
      and administrative
                                                                    
                                                                    1,706,638
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    1,706,638Total
      Operating Expenses
                                                                    
                                                                    2,765,484
                                                                    
                                                                    
                                                                    4,583
                                                                    
                                                                    
                                                                    2,770,067LOSS
      FROM OPERATIONS
                                                                    
                                                                    (2,798,608)
                                                                    
                                                                    
                                                                    (4,583)
                                                                    
                                                                    
                                                                    (2,803,191)OTHER
      INCOME (EXPENSES)Interest
      income
                                                                    
                                                                    224,853
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    224,853Interest
      expense
                                                                    
                                                                    (52,086)
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    (52,086)Total
      Other Income (Expenses)
                                                                    
                                                                    172,767
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    172,767NET
      LOSS BEFORE INCOME TAXES
                                                                    
                                                                    (2,625,841)
                                                                    
                                                                    
                                                                    (4,583)
                                                                    
                                                                    
                                                                    (2,630,424)Income
      taxes
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    -NET
      LOSS
                                                                    $
                                                                    (2,625,841)
                                                                    
                                                                    $
                                                                    (4,583)
                                                                    
                                                                    $
                                                                    (2,630,424)BASIC
      LOSS PER COMMON SHARE
                                                                    $
                                                                    (0.13)
                                                                    
                                                                    $
                                                                    (0.00)WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
                                                                    
                                                                    19,512,650
                                                                    
                                                                    
                                                                    7,000,000







The
accompanying notes are an integral part of these financial
statements


F-3
 Table of Contents


BLUE
EARTH SOLUTIONS, INC. (A Development Stage Company) Statements of Stockholders' Equity


Preferred
      Stock
                                                                                    
                                                                                    Common
      Stock
                                                                                    
                                                                                    Additional
                                                                                        Paid-In
                                                                                    
                                                                                    Deficit
                                                                                            Accumulated
                                                                                            During the
      DevelopmentShares
                                                                                    
                                                                                    Amount
                                                                                    
                                                                                    Shares
                                                                                    
                                                                                    Amount
                                                                                    
                                                                                    Capital
                                                                                    
                                                                                    Stage
                                                                                    
                                                                                    TotalBalance,
      February 5, 2008
                                                                                    
                                                                                    -
                                                                                    
                                                                                    $
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    $
                                                                                    -
                                                                                    
                                                                                    $
                                                                                    -
                                                                                    
                                                                                    $
                                                                                    -
                                                                                    
                                                                                    $
                                                                                    -Common
      shares issued to founders
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    7,000,000
                                                                                    
                                                                                    
                                                                                    7,000
                                                                                    
                                                                                    
                                                                                    (6,850)
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    150Series
      A preferred shares issued to founders
                                                                                    
                                                                                    400,000
                                                                                    
                                                                                    
                                                                                    400
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    (400)
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -Series
      B preferred shares issued in a
                                                                                      private
      placement at $10 per share
                                                                                    
                                                                                    36,500
                                                                                    
                                                                                    
                                                                                    37
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    364,963
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    365,000Net
      loss from inception through March 31, 2008
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    (4,583)
                                                                                    
                                                                                    
                                                                                    (4,583)Balance,
      March 31, 2008
                                                                                    
                                                                                    436,500
                                                                                    
                                                                                    
                                                                                    437
                                                                                    
                                                                                    
                                                                                    7,000,000
                                                                                    
                                                                                    
                                                                                    7,000
                                                                                    
                                                                                    
                                                                                    357,713
                                                                                    
                                                                                    
                                                                                    (4,583)
                                                                                    
                                                                                    
                                                                                    360,567Recapitalization
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    20,759,300
                                                                                    
                                                                                    
                                                                                    20,759
                                                                                    
                                                                                    
                                                                                    7,099
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    27,858Common
      shares returned and cancelled
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    (3,200,000)
                                                                                    
                                                                                    
                                                                                    (3,200)
                                                                                    
                                                                                    
                                                                                    3,200
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -Series
      B preferred shares issued in a
                                                                                      private
      placement at $10 per share
                                                                                    
                                                                                    44,000
                                                                                    
                                                                                    
                                                                                    44
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    439,956
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    440,000Series
      B preferred shares converted to common
                                                                                    
                                                                                    (80,500)
                                                                                    
                                                                                    
                                                                                    (81)
                                                                                    
                                                                                    
                                                                                    1,449,000
                                                                                    
                                                                                    
                                                                                    1,449
                                                                                    
                                                                                    
                                                                                    (1,368)
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -Common
      shares issued for services at $6.13 per share
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    17,000
                                                                                    
                                                                                    
                                                                                    17
                                                                                    
                                                                                    
                                                                                    80,733
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    80,750Series
      C preferred shares issued in a
                                                                                      private
      placement at $1,000 per share
                                                                                    
                                                                                    14,130
                                                                                    
                                                                                    
                                                                                    14
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    14,129,986
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    14,130,000Dividends
      on preferred stock
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    (945,355)
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    (945,355)Series
      A preferred shares converted to common stock
                                                                                    
                                                                                    (400,000)
                                                                                    
                                                                                    
                                                                                    (400)
                                                                                    
                                                                                    
                                                                                    6,000,000
                                                                                    
                                                                                    
                                                                                    6,000
                                                                                    
                                                                                    
                                                                                    (5,600)
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -Fair
      value of warrants granted
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    985,936
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    985,936Net
      loss for the twelve months ended through
                                                                                      March
      31, 2009
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    (2,625,841)
                                                                                    
                                                                                    
                                                                                    (2,625,841)Balance,
      March 31, 2009
                                                                                    
                                                                                    14,130
                                                                                    
                                                                                    $
                                                                                    14
                                                                                    
                                                                                    
                                                                                    32,025,300
                                                                                    
                                                                                    $
                                                                                    32,025
                                                                                    
                                                                                    $
                                                                                    15,052,300
                                                                                    
                                                                                    $
                                                                                    (2,630,424)
                                                                                    
                                                                                    $
                                                                                    12,453,915




The
accompanying notes are an integral part of these financial
statements.


F-4
 Table of Contents


BLUE
EARTH SOLUTIONS, INC. (A Development Stage Company) Statements of Cash Flows


For
      the Year Ended
                                                                  March 31, 2009
                                                          
                                                          
                                                          From
      Inception
                                                                    on February 5,
                                                                    2008 Through
                                                                    March 31,
      2008
                                                          
                                                          
                                                          From
      Inception
                                                                    on February 5,
                                                                    2008 Through
                                                                    March 31,
      2009OPERATING
      ACTIVITIESNet
      loss
                                                          $
                                                          (2,625,841)
                                                          
                                                          
                                                          $
                                                          (4,583)
                                                          
                                                          
                                                          $
                                                          (2,630,424)Adjustments
      to Reconcile Net Loss to NetCash
      Used in Operating Activities:Depreciation
      expense
                                                          
                                                          72,910
                                                          
                                                          
                                                          
                                                          4,583
                                                          
                                                          
                                                          
                                                          77,493Shares
      issued for services
                                                          
                                                          80,750
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          80,750Fair
      value of warrants granted
                                                          
                                                          985,936
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          985,936Changes
      in operating assets and liabilities:(Increase)
      decrease in prepaid expenses
                                                          
                                                          (106,976)
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (106,976)(Increase)
      decrease in accounts receivable
                                                          
                                                          (10,907)
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (10,907)(Increase)
      decrease in depository accounts
                                                          
                                                          (8,206,990)
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (8,206,990)(Increase)
      decrease in inventory
                                                          
                                                          (231,153)
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (231,153)Increase
      (decrease) in accounts payableand
      accrued expenses
                                                          
                                                          634,156
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          634,156Net
      Cash Used in Operating Activities
                                                          
                                                          (9,408,115)
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (9,408,115)INVESTING
      ACTIVITIESPurchase
      of property and equipment
                                                          
                                                          (5,388,840)
                                                          
                                                          
                                                          
                                                          (350,000)
                                                          
                                                          
                                                          
                                                          (5,738,840)Net
      Cash Used in Investing Activities
                                                          
                                                          (5,388,840)
                                                          
                                                          
                                                          
                                                          (350,000)
                                                          
                                                          
                                                          
                                                          (5,738,840)FINANCING
      ACTIVITIESRepayment
      of notes payable
                                                          
                                                          (200,000)
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (200,000)Borrowings
      of notes payable
                                                          
                                                          462,500
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          462,500Issuance
      of common shares for cash
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          150
                                                          
                                                          
                                                          
                                                          150Issuance
      of preferred shares for cash
                                                          
                                                          14,570,000
                                                          
                                                          
                                                          
                                                          365,000
                                                          
                                                          
                                                          
                                                          14,935,000Net
      Cash Provided by Financing Activities
                                                          
                                                          14,832,500
                                                          
                                                          
                                                          
                                                          365,150
                                                          
                                                          
                                                          
                                                          15,197,650NET
      INCREASE IN CASH
                                                          
                                                          35,545
                                                          
                                                          
                                                          
                                                          15,150
                                                          
                                                          
                                                          
                                                          50,695CASH
      AT BEGINNING OF PERIOD
                                                          
                                                          15,150
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -CASH
      AT END OF PERIOD
                                                          $
                                                          50,695
                                                          
                                                          
                                                          $
                                                          15,150
                                                          
                                                          
                                                          $
                                                          50,695SUPPLEMENTAL
      DISCLOSURES OF CASH
      FLOW INFORMATIONCASH
      PAID FOR:Interest
                                                          $
                                                          46,178
                                                          
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          46,178Income
      taxes
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          -NON
      CASH FINANCING ACTIVITIES:Property
      purchased for notes payables
                                                          $
                                                          1,049,000
                                                          
                                                          
                                                          $
                                                          200,000
                                                          
                                                          
                                                          $
                                                          1,249,000




The
accompanying notes are an integral part of these financial
statements.


F-5
 Table of Contents


BLUEEARTH SOLUTIONS, INC.
 (A
Development Stage Company)
 Notes to
Financial Statements
 March 31,
2009 and 2008
  1.           SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
 
 Nature of
Business
 Blue
Earth Solutions, Inc. (the Company) was incorporated in the State of Delaware on
February 5, 2008. The Company was incorporated to engage in the recycling
business. The Company purchased patents used to develop and market a practical,
economical and environmentally safe means of disposing of and recycling certain
polystyrene and expended polystyrene products.
 
 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 financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
 
 Basic (Loss) per Common
Share
 Basic
(loss) per share is calculated by dividing the Company’s net loss applicable to
common shareholders by the weighted average number of common shares during the
period. Diluted earnings per share is calculated by dividing the Company’s net
income available to common shareholders by the diluted weighted average number
of shares outstanding during the year. The diluted weighted average number of
shares outstanding is the basic weighted number of shares adjusted for any
potentially dilutive debt or equity.
 
 For
      the Year Ended
                              March
      31,2009
                            
                            From
      Inception on February 5,
                              2008
      Through
                              March
      31,2008Loss
      (numerator)
                            $
                            (2,625,841)
                            
                            $
                            (4,583)Shares
      (denominator)
                            
                            19,512,650
                            
                            
                            7,000,000Per
      share amount
                            $
                            (0.03)
                            
                            $
                            (0.00)
  Dividends
 The
Company has not adopted any policy regarding payment of common stock dividends.
No common stock dividends have been paid during any of the periods
shown.
 
 Cash and Cash
Equivalents
 For
purposes of the Statement of Cash Flows, the Company considers all highly liquid
instruments purchased with a maturity of three months or less to be cash
equivalents to the extent the funds are not being held for investment
purposes.
 
 F-6
 Table of Contents
 BLUE
EARTH SOLUTIONS, INC.
 (A
Development Stage Company)
 Notes to
Financial Statements
 March 31,
2009 and 2008
 
 1.           SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
 
 Income
Taxes
 The
Company provides for income taxes under Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. SFAS No. 109 requires the use of
an asset and liability approach in accounting for income taxes. Deferred tax
assets and liabilities are recorded based on the differences between the
financial statement and tax bases of assets and liabilities and the tax rates in
effect when these differences are expected to reverse.
 
 SFAS No.
109 requires the reduction of deferred tax assets by a valuation allowance if,
based on the weight of available evidence, it is more likely than not that some
or all of the deferred tax assets will not be realized.
 
 The
provision for income taxes differs from the amounts which would be provided by
applying the statutory federal income tax rate of 39% to the net loss before
provision for income taxes for the following reasons:
  March
      31,2009
                            
                            March
      31,2008Income
      tax expense at statutory rate
                            $
                            (1,024,078)
                            
                            $
                            (1,787)Common
      stock issued for services
                            
                            31,493
                            
                            
                            -Warrants
      issued for services
                            
                            384,515
                            
                            
                            -Valuation
      allowance
                            
                            608,070
                            
                            
                            1,787Income
      tax expense per books
                            $
                            -
                            
                            $
                            -
 
 Net
deferred tax assets consist of the following components as of:
 
 March
      31, 2009
                            
                            March
      31, 2008NOL
      carryover
                            $
                            609,857
                            
                            $
                            1,787Valuation
      allowance
                            
                            (609,857)
                            
                            
                            (1,787)Net
      deferred tax asset
                            $
                            -
                            
                            $
                            -
 
 Due to
the change in ownership provisions of the Tax Reform Act of 1986, net operating
loss carry forwards of $1,563,738  for federal income tax reporting
purposes are subject to annual limitations. Should a change in ownership occur
net operating loss carry forwards may be limited as to use in future
years.
 
 Impairment of Long-Lived
Assets
 The
Company continually monitors events and changes in circumstances that could
indicate carrying amounts of long-lived assets may not be recoverable. When such
events or changes in circumstances are present, the Company assesses the
recoverability of long-lived assets by determining whether the carrying value of
such assets will be recovered through undiscounted expected future cash flows.
If the total of the future cash flows is less than the carrying amount of those
assets, the Company recognizes an impairment loss based on the excess of the
carrying amount over the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or the fair value less costs to
sell.
  F-7
 Table of Contents
 BLUE
EARTH SOLUTIONS, INC.
 (A
Development Stage Company)
 Notes to
Financial Statements
 March 31,
2009 and 2008
 1.           SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
 
 Accounting
Basis
 The basis
is accounting principles generally accepted in the United States of
America.  The Company has adopted a March 31 fiscal year
end.
 
 Stock-based
compensation.
 As of
March 31, 2009, the Company has not issued any share-based payments to its
employees.
 
 The
Company adopted SFAS No. 123-R effective January 1, 2006 using the
modified prospective method. Under this transition method, stock compensation
expense includes compensation expense for all stock-based compensation awards
granted on or after January 1,2006, based on the grant-date fair value
estimated in accordance with the provisions of SFAS No. 123-R.
 
 Recent Accounting
Pronouncements
 In April
2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly” (“FSP FAS
157-4”).  FSP FAS 157-4 provides guidance on estimating fair value
when market activity has decreased and on identifying transactions that are not
orderly.  Additionally, entities are required to disclose in interim
and annual periods the inputs and valuation techniques used to measure fair
value.  This FSP is effective for interim and annual periods ending
after June 15, 2009.  The Company does not expect the adoption of FSP
FAS 157-4 will have a material impact on its financial condition or results of
operation.
  In
October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of
a Financial Asset When the Market for That Asset is Not Active,” (“FSP FAS
157-3”), which clarifies application of SFAS 157 in a market that is not
active.  FSP FAS 157-3 was effective upon issuance, including prior
periods for which financial statements have not been issued.  The
adoption of FSP FAS 157-3 had no impact on the Company’s results of operations,
financial condition or cash flows.
 
 In
December 2008, the FASB issued FSP No. FAS 140-4 and FIN 46(R)-8, “Disclosures
by Public Entities (Enterprises) about Transfers of Financial Assets and
Interests in Variable Interest Entities.”  This disclosure-only FSP
improves the transparency of transfers of financial assets and an enterprise’s
involvement with variable interest entities, including qualifying
special-purpose entities.  This FSP is effective for the first
reporting period (interim or annual) ending after December 15, 2008, with
earlier application encouraged.  The Company adopted this FSP
effective January 1, 2009.  The adoption of the FSP had no impact
on the Company’s results of operations, financial condition or cash
flows.
 
 In
December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures
about Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”).  FSP
FAS 132(R)-1 requires additional fair value disclosures about employers’ pension
and postretirement benefit plan assets consistent with guidance contained in
SFAS 157.  Specifically, employers will be required to disclose
information about how investment allocation decisions are made, the fair value
of each major category of plan assets and information about the inputs and
valuation techniques used to develop the fair value measurements of plan assets.
This FSP is effective for fiscal years ending after December 15,
2009.  The Company does not expect the adoption of FSP FAS 132(R)-1
will have a material impact on its financial condition or results of
operation.
  F-8
 Table of Contents
 BLUE
EARTH SOLUTIONS, INC.
 (A
Development Stage Company)
 Notes
to Financial Statements
 March
31, 2009 and 2008
  1.           SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
 
 Recent Accounting
Pronouncements (Continued)
 In
September 2008, the FASB issued exposure drafts that eliminate qualifying
special purpose entities from the guidance of SFAS No. 140, “Accounting for
Transfers and Servicing of Financial  Assets and  Extinguishments of
Liabilities,” and  FASB  Interpretation 46 (revised December 2003),
“Consolidation of  Variable  Interest Entities − an
interpretation of ARB  No. 51,” as well as other
modifications.  While the proposed revised pronouncements have not
been finalized and the proposals are subject to further public comment, the
Company anticipates the changes will not have a significant impact on the
Company’s financial statements.  The changes would be effective March
1, 2010, on a prospective basis.
 
 In
June 2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities,
(“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting,
and therefore need to be included in the computation of earnings per share under
the two-class method as described in FASB Statement of Financial Accounting
Standards No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for
financial statements issued for fiscal years beginning on or after
December 15, 2008 and earlier adoption is prohibited. We are not required
to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have
material effect on our consolidated financial positionand results of
operations if adopted.
 
 In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163,
“Accounting for Financial Guarantee Insurance Contracts-and interpretation of
FASB Statement No. 60”.  SFAS No. 163 clarifies how Statement 60
applies to financial guarantee insurance contracts, including the recognition
and measurement of premium revenue and claims liabilities. This statement also
requires expanded disclosures about financial guarantee insurance contracts.
SFAS No. 163 is effective for fiscal years beginning on or after December 15,
2008, and interim periods within those years. SFAS No. 163 has no effect on the
Company’s financial position, statements of operations, or cash flows at this
time.
 
 In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162,
“The Hierarchy of Generally Accepted Accounting Principles”.  SFAS No.
162 sets forth the level of authority to a given accounting pronouncement or
document by category. Where there might be conflicting guidance between two
categories, the more authoritative category will prevail. SFAS No. 162 will
become effective 60 days after the SEC approves the PCAOB’s amendments to AU
Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on
the Company’s financial position, statements of operations, or cash flows at
this time.
  In March
2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging Activities—an amendment of
FASB Statement No. 133.  This standard requires companies to provide
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. This Statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. The Company has not yet
adopted the provisions of SFAS No. 161, but does not expect it to have a
material impact on its consolidated financial position, results of operations or
cash flows.
 
 F-9
 Table of Contents
 BLUE
EARTH SOLUTIONS, INC.
 (A
Development Stage Company)
 Notes to
Financial Statements
 March 31,
2009 and 2008
 1.           SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
 
 Recent Accounting
Pronouncements (Continued)
 In
December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110 regarding
the use of a "simplified" method, as discussed in SAB No. 107 (SAB 107), in
developing an estimate of expected term of "plain vanilla" share options in
accordance with SFAS No. 123 (R), Share-Based Payment.  In particular,
the staff indicated in SAB 107 that it will accept a company's election to use
the simplified method, regardless of whether the company has sufficient
information to make more refined estimates of expected term. At the time SAB 107
was issued, the staff believed that more detailed external information about
employee exercise behavior (e.g., employee exercise patterns by industry and/or
other categories of companies) would, over time, become readily available to
companies. Therefore, the staff stated in SAB 107 that it would not expect a
company to use the simplified method for share option grants after December 31,
2007. The staff understands that such detailed information about employee
exercise behavior may not be widely available by December 31, 2007. Accordingly,
the staff will continue to accept, under certain circumstances, the use of the
simplified method beyond December 31, 2007. The Company currently uses the
simplified method for “plain vanilla” share options and warrants, and will
assess the impact of SAB 110 for fiscal year 2009. It is not believed that this
will have an impact on the Company’s consolidated financial position, results of
operations or cash flows.
 
 In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51.  This
statement amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. Before this statement was issued,
limited guidance existed for reporting noncontrolling interests. As a result,
considerable diversity in practice existed. So-called minority interests were
reported in the consolidated statement of financial position as liabilities or
in the mezzanine section between liabilities and equity. This statement improves
comparability by eliminating that diversity. This statement is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008 (that is, January 1, 2009, for entities with calendar
year-ends). Earlier adoption is prohibited. The effective date of this statement
is the same as that of the related Statement 141 (revised 2007). The Company
will adopt this Statement beginning March 1, 2009. It is not believed that this
will have an impact on the Company’s consolidated financial position, results of
operations or cash flows.
 
 In
December 2007, the FASB, issued FAS No. 141 (revised 2007), Business
Combinations’.  This Statement replaces FASB Statement No. 141,
Business Combinations, but retains the fundamental requirements in
Statement 141.  This Statement establishes principles and
requirements for how the acquirer: (a) recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree; (b) recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain purchase;
and (c) determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. This statement applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. An entity may not
apply it before that date. The effective date of this statement is the same as
that of the related FASB Statement No. 160, Noncontrolling Interests in
Consolidated Financial Statements.  The Company will adopt this
statement beginning March 1, 2009. It is not believed that this will have an
impact on the Company’s consolidated financial position, results of operations
or cash flows.
 
 F-10
 Table of Contents
 BLUE
EARTH SOLUTIONS, INC.
 (A
Development Stage Company)
 Notes to
Financial Statements
 March 31,
2009 and 2008
 1.           SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Revenue
Recognition
 The
Company recognizes revenue when products are fully delivered or services have
been provided and collection is reasonably assured.
 
 Advertising
Costs
 The
Company’s policy regarding advertising is to expense advertising when incurred.
The Company had not incurred any advertising expense as of March 31,
2009.
 
 Accounts
Receivable
 Receivables
from the sale of goods and services are stated at net realizable value. This
value includes an appropriate allowance for estimated uncollectible accounts.
 The allowance is calculated based on past collectability and customer
relationships.  The Company recorded an allowance for doubtful accounts of
$467 and $-0- for the years ended March 31, 2009 and 2008,
respectively.
 
 Inventory
 In
accordance with ARB No. 43 “Inventory Pricing,” the
Company’s inventory is valued at the lower of cost (the purchase price,
including additional fees) or market based on using the entire value of
inventory.  Inventories are determined based on the first-in first-out
(FIFO) basis.
  As of
March 31 inventory consisted of the following:
 2009
                                                                      
                                                                      2008Raw
      materials
                                                                      $
                                                                      231,153
                                                                      
                                                                      -Finished
      goods
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      -Work
      in process
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      -Total
                                                                      $
                                                                      231,153
                                                                      
                                                                      $
  2.           PREFERRED STOCK – SERIES
A
 
 There are
Ten Million (10,000,000) shares of Preferred Series A stock authorized with a
par value of $0.0001.
 
 The
issued “Series A Preferred Stock” is referred to herein as the “Series A
Preferred Stock.”
 
 1.
                Amount.  The
      number of shares issued constituting Series A Preferred Stock shall be
      400,000.
 
 2.
                Stated
      Capital.  The amount to be represented in stated capital
      at all times for each share of Series A Preferred Stock shall be
      $16.50.
 
 3.
                Rank.  All
      shares of Series A Preferred Stock shall rank prior to all of the
      Corporation’s Common Stock, par value $.0001 per share (the “Common
      Stock”), now or hereafter issued, both as to payment of dividends and as
      to distributions of assets upon liquidation, dissolution or winding up of
      the Corporation, whether voluntary or
  involuntary.
 
 F-11
 Table of Contents
 BLUE
EARTH SOLUTIONS, INC.
 (A
Development Stage Company)
 Notes
to Financial Statements
 March
31, 2009 and 2008
 2.           PREFERRED STOCK – SERIES A
(CONTINUED)
 
 4.
                Dividends. The dividend shall be
      payable annually to the holders of shares of Series A Preferred Stock at
      the option of the Corporation in cash or common stock valued at the
      average closing price of the stock for the twenty (20) trading days
      subsequent to dividend due date.  The dividend rate is eight
      (8%) percent of the stated value (“Stated Value”) per share of the shares
      of Series A Preferred Stock not to exceed one (1%) percent of gross
      revenues as set forth in the Corporation’s financial statements, but not
      less then 2% of stated value of outstanding balance of the Series A
      Preferred. Stated Value is defined as $16.50 per outstanding share of
      Series A Preferred Stock.
  5.
                Liquidation
      Preference.
 (a)
                The
      liquidation value of shares of this Series, in case of the voluntary or
      involuntary liquidation, dissolution or winding-up of the Corporation,
      shall be $16.50 per share.
 
 (b)
                In
      the event of any voluntary or involuntary liquidation, dissolution or
      winding-up of the Corporation, the holders of shares of this Series shall
      be entitled to receive the liquidation value of such shares held by them
      until the liquidation value of all shares of Series A Preferred Stock
      shall have been paid in full.  Upon payment in full of the
      liquidation value to which the holders of shares of the shares of Series A
      Preferred Stock are entitled, the holders of shares of this Series will
      not be entitled to any further participation in any distribution of assets
      by the Corporation.
 
 (c)
                Neither
      a consolidation or merger of the Corporation with or into any other
      corporation, nor a merger of any other corporation with or into the
      Corporation, nor a sale or transfer of all or any part of the
      Corporation’s
 Assets or
cash or securities or other property shall be considered a liquidation,
dissolution or winding-up of the Corporation’s within the meaning of this
Paragraph 5.
 
 6.
                Voting
      Rights.
 The
      shares of Series A Preferred Stock shall have no voting
      rights,
 
 7.
                Redemption.
                  The shares of Series A Preferred Stock are
      redeemable at the option of the Corporation in cash at $16.50 per share or
      in shares of common stock in the ratio of five (5) shares of common stock
      for each share of Series A Preferred Stock redeemed. No redemption of
      Series A Preferred Stock shall be made in shares of common stock unless
      the common stock is trading at an average of $6.00 for a period of least
      twenty (20) consecutive days prior to the redemption. The Corporation
      shall send notice redemption at least 30 days prior to the date of
      redemption; and the holder may convert the Series A Preferred Stock in
      shares of Common Stock pursuant to paragraph 8 below at any time prior to
      the date of redemption as specified in the notice of
      redemption.
  F-12
 Table of Contents
 BLUE
EARTH SOLUTIONS, INC. (A
Development Stage Company)
 Notes
to Financial Statements
 March
31, 2009 and 2008
 
 2.           PREFERRED STOCK – SERIES A
(CONTINUED)
  8.
                Conversion
      Provisions.
 (a)
                Conversion at Option
      of the Holders.  Each share of Series A Preferred Stock
      shall be convertible, at the option of the holder thereof, at any time on
      or after the date of issue, into fully paid and non-assessable shares of
      Common Stock and such other securities and property as hereinafter
      provided, at the rate of five (5) shares of Common Stock for each full
      share of Series A Preferred Stock (“Conversion Ratio”) subject to
      adjustment in the event of a stock split or
    recapitalization.
 
 (b)
                Mechanics of
      Conversion.  Any holder of shares of Series A Preferred
      Stock desiring to convert such shares into Common Stock shall surrender
      the certificate or certificates for such shares of Series A Preferred
      Stock at the office of the transfer agent which certificate or
      certificates shall be duly endorsed or accompanied by proper instruments
      of , accompanied by irrevocable written notice to the Corporation that the
      holder elects so to convert such shares of Series A Preferred Stock and
      specifying the name or names (with address) in which certificates are to
      be issued.
 
 3.           PREFERRED STOCK – SERIES
B
 
 There are
Five Million (5,000,000) shares of Series B Preferred Stock authorized with a
par value of 0.0001 per share, 36,500 of which have been issued.  Each
Series B Preferred share has voting rights of one vote per share, is convertible
to six Common Shares of the Company (“Common Shares”), carries a liquidation
value of $10 per share, and bears a cumulative annual dividend of $1 per share,
payable quarterly, which increases to $1.30 per share if the cash dividend is
not paid within 30 days of the end of each quarter. In the event a dividend is
not paid by  January 30next
following the year for which such dividend has accrued, the dividend will be
payable in common shares valued at the average closing price for the preceding
twenty trading days. The Series B Preferred Shares are callable by the Company
upon 30 days’ notice at $10.00 per share during which time the holder may
convert into common shares.  Upon conversion of the Preferred Shares
into common shares, each holder will in addition to receive two warrants for
each Series B Preferred Share converted, exercisable into common shares at $4.00
per share until December 31, 2010. The Warrants are callable by the Company upon
thirty days’ notice in the event the Common Shares trade for the ten trading
days preceding such notice at or above $6.00 per share Holders may exercise
their warrants during the notice period.
 
 F-13
 Table of Contents
 BLUE EARTH SOLUTIONS, INC. (A
Development Stage Company)
 Notes
to Financial Statements
 March
31, 2009 and 2008
 
 4.           PREFERRED
STOCK – SERIES C
 
 The
Company’s Series C Preferred Stock carries rights and preferences senior to
those of its common stock and to the rights of its Series A Preferred Stock and
Series B Preferred Stock.
 
 The
Company’s Series C Preferred Stock votes with the  common stock at a
rate of 100 votes for every share of Series C Preferred Stock.  Each
share of the Series C Preferred Stock is entitled to a cumulative dividend of
$80 per share, payable annually on December 31 of each year, prorated to the
date of issuance for partial years.  If the Company has funds legally
available to pay the dividend, but fails to do so by January 31 of the following
year, then the missed dividend increases to $104 per share payable in cash or,
at the option of the Series C Preferred shareholder, the Company’s common stock
valued at the average closing price for the twenty trading days after December
31 just passed.  The dividend on the Series C Preferred Stock must be
paid prior to the payment of any dividends to the holders of the Company’s
Series A Preferred Stock, our Series B Preferred Stock, or its common
stockholders.  The Series C Preferred Stock also carries a $1,000 per
share liquidation preference, which must be paid prior to any amounts paid upon
liquidation of the Company to the holders of our Series A Preferred Stock, its
Series B Preferred Stock, or its common stockholders.
 
 The
Company can redeem the Series C Preferred Stock upon written notice of not less
than thirty days nor more than sixty days and upon the payment of $1,100 per
share.  Upon receipt of a redemption notice, holders of the Series C
Preferred Stock may elect to convert their shares into, for each share of Series
C Preferred Stock converted, one hundred and sixty shares of our common stock
and a warrant to purchase one hundred shares of the Company’s common stock at
any time prior to December 31, 2010 at a strike price of $8.00 per
share.
 
 4.           CAPITAL
STOCK
 
 There are
a total of One Hundred Million (100,000,000) shares of common stock authorized
having a par value of $0.0001 per share.  The Company issued the
7,000,000 common shares and 400,000 Series A Preferred Shares to its founders at
its inception for cash of $150.
 
 During
the year ended March 31, 2008, 36,500 shares of the Series B Preferred Stock
were issued for $365,000 in cash in a  private placement.
 
 During
the year ended March 31, 2009, 44,000 shares of the Series B Preferred Stock
were issued for $440,000 in cash in a  private placement. An
additional 14,130 shares  of the Series C Preferred stock were issued
for $14,130,000 in cash in a private placement.
 Also,
during the year ended March 31, 2009, a recapitalization occurred and the
Company issued 20,759,300 shares of common stock and 3,200,000 shares of common
stock were returned and cancelled.
 
 Two stock
conversions occurred during the year.  A total of 400,000 shares of
the Company’s Series A Preferred stock were converted into 6,000,000 shares of
common stock and 80,500 shares of the Series B Preferred stock were converted
into 1,449,000 share of common stock.  During the year 17,000 shares
of common stock were issued for services at $6.13 per share.  As of
March 31, 2009, the Company had 32,025,300 common shares issued and
outstanding.
 
 F-14
 Table of Contents
 BLUE EARTH SOLUTIONS, INC. (A
Development Stage Company)
 Notes
to Financial Statements
 March
31, 2009 and 2008
 
 5.           
GOING
CONCERN
 The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principle, which contemplate continuation of the
Company as a going concern.  However, the Company has accumulated
deficit of $2,630,424 as of March 31, 2009.  The Company currently has
limited liquidity, and has not completed its efforts to establish a stabilized
source of revenues sufficient to cover operating costs over an extended period
of time.
 
 Management
anticipates that the Company will be dependent, for the near future, on
additional investment capital to fund operating expenses The Company intends to
position itself so that it may be able to raise additional funds through the
capital markets. In light of management’s efforts, there are no assurances that
the Company will be successful in this or any of its endeavors or become
financially viable and continue as a going concern.
 
 6.  NOTES PAYABLE-RELATED
PARTIES
 
 For the
year ended March 31, 2009, the Company had a total of $462,500 in related party
notes payable.  The notes payable are interest bearing, secured by
equipment, and are due and payable upon demand. The note for $407,500 bears
interest at 8% per annum and the note for $55,000 bears interest at 12% per
annum.
 
 7.           PROPERTY AND
EQUIPMENT
 
 The
Company’s equipment is recorded at cost and is being depreciated over its
estimated useful life of 5 years using the straight line method. Depreciation
expense for the periods ended March 31, 2009 and 2008 was $72,910 and $4,583,
respectively.
 
 The
components of equipment as of March 31, 2009 are as follows:
  Manufacturing
      equipment
                                                    $
                                                    4,991,675Vehicles
                                                    
                                                    111,379Building
      and improvements
                                                    
                                                    579,786Land
                                                    
                                                    1,305,000Less:
      Accumulated depreciation
                                                    
                                                    (77,493)Net
      Property and Equipment
                                                    $
                                                    6,910.347
 8.           CONTINGENCIES
 
 The
Company has sued certain shareholders to prevent them from publicly trading
unregistered shares of the Company’s common stock. The shareholders have made a
counter claim against the Company for damages. The Company believes that the
counter claim will be offset by the Company’s claim resulting in no net loss.
Accordingly, the Company has not recorded a reserve for the counter claim at
this time. The Company’s legal counsel estimates the cost of bringing the case
through trial to be approximately $200,000 including the fees accrued to
date.
  F-15
 Table of Contents