**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-KSB**






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






For
      the
      fiscal year ended December
      31, 2006









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











Commission
      file number 001-32220





**AMERICAN
      WATER STAR, INC.**


(Exact
      name of small business issuer as specified in its charter)


**Nevada**
            **87-0636498**(State
                or other jurisdiction of incorporation or organization)
            (IRS
                Employer Identification No.)





**2580
      Anthem Village Dr., Suite B1**


**Henderson,
      Nevada 89052**


(Address
      of principal executive offices)





Securities
      registered pursuant to Section 12(b) of the Exchange Act: None




Securities
      registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $0.001
      par value









Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act.






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











Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant's knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB.  ̈





The
      issuer's revenues for its most recent fiscal year ended December 31, 2006. $-0-.





The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the average bid and ask price, as of
      August 2, 2007 was $373,076 based on a share value of $0.005.





The
      number of shares of Common Stock, $0.001 par value, outstanding on July 16,
      2007
      was 136,852,858 shares.









Transitional
      Small Business Disclosure Format (check one): Yes No











AMERICAN
      WATER STAR, INC


FOR
      THE
      YEAR ENDED


DECEMBER
      31, 2005




Index
      to
      Report


on
      Form
      10-KSB






PART
                I
            PageItem
                1.
            Description
                of Business
            2Item
                2.
            Description
                of Property
            10Item
                3.
            Legal
                Proceedings
            11Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            12




PART
      II




Item
                5.
            Market
                for Common Equity, Related Stockholder Matters and Small Business
                Issuer
                Purchases of Equity Securities
            13Item
                6.
            Management’s
                Discussion and Analysis or Plan of Operation
            16Item
                7.
            Financial
                Statements
            26Item
                8.
            Changes
                in and Disagreements With Accountants on Accounting and Financial
                Disclosure
            26Item
                8A.
            Controls
                and Procedures
            27Item
                8B.
            Other
                Information
            28




PART
      III




Item
                9.
            Directors,
                Executive Officers, Promoters and Control Persons; Compliance With
                Section
                16(a) of the Exchange Act
            28Item
                10.
            Executive
                Compensation
            33Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            35Item
                12.
            Certain
                Relationships and Related Transactions
            36Item
                13.
            Exhibits
            38Item
                14.
            Principal
                Accountant Fees and Services
            40















**FORWARD-LOOKING
      STATEMENTS**





This
      document contains “forward-looking statements” within the meaning of the Private
      Securities Litigation Reform Act of 1995. All statements other than statements
      of historical fact are “forward-looking statements” for purposes of federal and
      state securities laws, including, but not limited to, any projections of
      earnings, revenue or other financial items; any statements of the plans,
      strategies and objections of management for future operations; any statements
      concerning proposed new services or developments; any statements regarding
      future economic conditions or performance; any statements or belief; and any
      statements of assumptions underlying any of the foregoing.





Forward-looking
      statements may include the words “may,” “could,” “estimate,” “intend,”
“continue,” “believe,” “expect” or “anticipate” or other similar words. These
      forward-looking statements present our estimates and assumptions only as of
      the
      date of this report. Except for our ongoing securities laws, we do not intend,
      and undertake no obligation, to update any forward-looking
      statement.





Although
      we believe the expectations reflected in any of our forward-looking statements
      are reasonable, actual results could differ materially from those projected
      or
      assumed in any of our forward-looking statements. Our future financial condition
      and results of operations, as well as any forward-looking statements, are
      subject to change and inherent risks and uncertainties. The factors impacting
      these risks and uncertainties include, but are not limited to:





·
            Our
                current deficiency in working
                capital;




·
            Our
                ability to comply with SEC reporting
                requirements;




·
            Loss
                of our real and personal property as a result of foreclosure or sale
                of
                our assets by a receiver;




·
            Increased
                competitive pressures from existing competitors and new
                entrants;




·
            Inability
                of co-packers to meet production requirements;




·
            Interruption
                of critical packaging materials and/or
                flavorings;




·
            Unavailability
                of critical production ingredients such as sweeteners and plastics;




·
            Adverse
                state or federal legislation or regulation that increases the costs
                of
                compliance, or adverse findings by a regulator with respect to existing
                operations;




·
            Loss
                of customers or sales weakness;




·
            Our
                ability to collect accounts
                receivable;




·
            Inability
                to achieve future sales levels or other operating results;
                and




·
            The
                unavailability of funds for capital
                expenditures.














Actual
      future performance and results could differ from that contained in or suggested
      by these forward-looking statements as a result of factors set forth in this
      Form 10-KSB in particular as set forth in the “Management’s Discussion and
      Analysis or Plan of Operation” under Item 6.





In
      this
      form 10-KSB references to “American Water Star,” “the Company”, “we,” “us,” and
“our” refer to AMERICAN WATER STAR, INC and its subsidiaries, unless context
      otherwise determines.





**PART
      I**





**ITEM
      1.**  **DESCRIPTION
      OF BUSINESS**





**(a)
      Business Development**





American
      Water Star, Inc. was incorporated as American Career Centers, Inc., in the
      State
      of Nevada on June 15, 1999. The purpose of the company was to serve as a holding
      company for the acquisition of information technology career training centers
      and related businesses. Effective December 3, 1999, American Water Star acquired
      100% of the outstanding shares of Tunlaw Capital Corporation, a publicly-held
      reporting company, in exchange for an aggregate of 200,000 shares of common
      stock, with Tunlaw becoming a wholly-owned subsidiary. With the completion
      of
      this acquisition, American Water Star became the successor issuer to Tunlaw,
      and
      retained public company reporting status under the Exchange Act. Tunlaw has
      had
      no operations to date and is inactive.




On
      April
      2, 2002, we authorized the amendment to American Career Centers, Inc.’s Articles
      of Incorporation to change its name to American Water Star, Inc., to reflect
      the
      significant change in our character and strategic focus relating to our water
      bottling and distribution business. Subsequent to our name change we pursued
      the
      acquisition of Water Star Bottling, Inc. as the basis of our new business plan.
      We later voided the acquisition and have since filed an involuntary bankruptcy
      petition against Water Star Bottling.





Acquisition
      of New Age Packaging, Inc .





On
      December 23, 2002, we completed the acquisition of New Age Packaging, Inc.
      (then
      known as American Distribution & Packaging, Inc.), a privately-held Nevada
      corporation (“New Age”). Pursuant to that Agreement, New Age exchanged 100% of
      its outstanding common stock for 5,200,000 newly issued shares of our common
      stock, which was issued to former officers and directors of American Water
      Star
      whom were principals of New Age pre-merger. Upon completion of the acquisition,
      New Age became a wholly-owned subsidiary of American Water Star.





Although
      the consideration exchanged in the New Age acquisition was not negotiated at
      “arms-length,” our directors and executive officers deemed it reasonable based
      on certain criteria, such as the valuation of the assets of New Age; New Age’s
      current and historical business operations; the potential of New Age; and the
      potential benefit to our stockholders. Our directors determined that the
      consideration for the exchange was reasonable under these
      circumstances.












New
      Age
      is developing a packaging process that will be an alternative to traditional
      plastic bottles, glass containers and aluminum cans. This process requires
      alternative manufacturing and distribution coordination as compared to
      traditional bottling procedures.





All
      of
      the original equipment owned by New Age was designed to be used in the
      production of bottled beverages; accordingly, it was transferred as a dividend
      to American Water Star in early 2003. In December of 2003, our Board of
      Directors declared a dividend to stockholders of record as of March 15, 2004,
      in
      the form of all of the common stock of New Age. Due to American Water Star’s
      issues with its loans with Laurus Master Fund and the delisting of our
      securities from the American Stock Exchange, we have not been able to effectuate
      the distribution of the NAP shares. We still believe the anticipated business
      model for NAP is not compatible with our current operations and we believe
      that
      the divestiture will have little impact on our future operations.





Acquisition
      of All-Star Beverages, Inc .





On
      December 24, 2002, we completed the acquisition of All-Star Beverages, Inc.,
      a
      privately-held Nevada corporation (“All-Star”), pursuant to an Acquisition
      Agreement dated as of September 6, 2002. Pursuant to that Agreement, All-Star
      exchanged 100% of its outstanding common stock for 12,645,824 newly issued
      shares of our common stock. Roger Mohlman, our current CEO and Chairman,
      received 11,103,433 of the shares issued in the exchange. Upon completion of
      the
      acquisition, All-Star became a wholly-owned subsidiary of American Water
      Star.





Although
      the consideration exchanged in the All-Star acquisition was not negotiated
      at
“arms-length,” our directors and executive officers deemed it reasonable based
      on certain criteria such as the valuation of the assets of All-Star; All-Star’s
      current and historical business operations; the potential of All-Star; and
      the
      potential benefit to our stockholders. Our directors determined that the
      consideration for the exchange was reasonable under these
      circumstances.





The
      majority of our operations were conducted through All-Star. We had contractual
      relationships with various independent distributors, brokers, both single and
      multi-location retail operations, and governmental agencies throughout the
      United States.





As
      a
      result of the All-Star and New Age acquisitions, the former stockholders of
      All-Star and New Age became the controlling stockholders of American Water
      Star.











Acquisition
      of Colorado River Distributors (“C.R.D.”), Nevada Division :





During
      the first quarter of 2005, we entered into an agreement to purchase from
      Colorado River Distributors, LLC, the distribution rights of their Nevada
      Division. In addition to purchasing the distribution rights, we purchased the
      existing inventory of their Nevada Division. Colorado River Distributors has
      distributing agreements for the paper products of Arrowhead Water, Coca Cola,
      Gatorade, and Tropicana. Upon this acquisition, we established a new subsidiary;
      C.R.D. of Nevada, in which we incorporated the operations of Colorado River
      Distributors’ Nevada Division and consolidated the business with our operations
      in Las Vegas, Nevada.














Additional
      Subsidiaries of American Water Star, Inc .





With
      the
      purchase and completion of the three plants in the United States, separate
      Nevada corporations were incorporated for each plant. These corporations only
      held the physical assets of each plant. The following is a list of all
      subsidiaries of American Water Star owned as of December 31, 2005. Due to the
      defaults with Laurus Master Fund, which is described in more detail below,
      we
      lost all assets owned by the listed subsidiaries and no longer operate any
      of
      the listed entities.





**Name
                of Subsidiary**
            **Date
                of Incorporation**
            **Operating
                Status**All
                Star Beverages, Arizona
            March
                5, 2004
            RevokedAll
                Star Beverages JAX
            January
                1, 2004
            RevokedAll
                Star Beverages Mississippi
            August
                26, 2004
            RevokedHawaiian
                Tropicals
            March
                5, 2004
            RevokedC.R.D.
                of Nevada
            March
                6, 2005
            RevokedTunlaw
                Capital Corporation
            Pre
                1999
            Inactive





**(b)
      Business of Issuer**





American
      Water Star was started as a company that developed, marketed, sold, and
      distributed bottled water with four branded beverages: Hawaiian Tropic, Geyser
      Fruit, Geyser Sport, and Geyser Fruta. The products were orientated to the
      health conscious consumer looking for an alternative to products containing
      high
      sugar and caffeine levels. Our customers included single and multi-store retail
      operations, governmental agencies, and distributors who in turn sell to retail
      stores, convenience stores, schools and other outlets. In addition, we branched
      into the private label and co-packing industries in the fourth quarter of
      2004.




We
      initially sold our products exclusively through distributors who then supplied
      our products to retailers. Although we continued to use distributors, we also
      expanded our sales effort through sales directly to retailers. As of December
      31, 2005, we sold through distributors and directly to customers.





We
      had
      hoped the private label and co-packaging of beverages for other corporations
      would allow us to avoid costly marketing expenses that would otherwise be
      associated with brand development, launch, and continuing promotions.













**CURRENT
      OPERATIONS**





During
      the third quarter of 2005, we entered into a “Forbearance Agreement” with Laurus
      Master Fund (“Laurus”) During the third quarter of 2005, we entered into a
“Forbearance Agreement” with Laurus Master Fund (“Laurus”). Pursuant to the
      Forbearance Agreement, Laurus agreed to forbear taking action on our existing
      defaults until October 26, 2007, provided that we did not default under the
      new
      Forbearance Agreement. In consideration for the Forbearance Agreement, we issued
      a Secured Convertible Term Note in the principal amount of $1,286,098.61, which
      represented the aggregate accrued interest and fees owed to Laurus as of July
      31, 2005.





On
      September 15, 2005, Laurus notified us that certain Events of Default had
      occurred under the Second Note and demanded payment of approximately $207,458
      by
      September 21, 2005. Although our operations continued through the third quarter
      of 2005, the impact of the default to Laurus had a negative impact on our
      ability to continue operations as previously planned.





During
      the fourth quarter of 2005, our operations ceased to exist and Laurus began
      to
      foreclose all of our assets and subsidiaries. On November 4, 2005, Laurus again
      notified us that certain defaults had occurred in the Securities Purchase
      Agreement, including our failure to make interest payments on September 1,
      2005,
      October 1, 2005 and November 1, 2005. In addition, we had failed to make
      principal and interest payments due to Laurus on August 1, 2005, September
      1,
      2005, October 1, 2005 and November 1, 2005. Based upon the occurrence and
      continuance of these defaults, Laurus notified us that they had accelerated
      the
      amounts due under the obligations, demanding payment in full on November 7,
      2005
      in the amount of $6,694,875.





Subsequent
      to November 7, 2005, foreclosure proceedings were begun on all of our real,
      personal, tangible, and intangible property, including all buildings,
      structures, leases, fixtures, and moveable personal property. On March 2, 2006,
      all of the real property was sold through a foreclosure sale, and on March
      23,
      2006, all personal property was sold through a UCC sale. Pursuant to the Order
      of the Court, on or about April 3, 2006, the Superior Court of the State of
      Arizona in and for the County of Maricopa approved an order (i) Approving
      Receiver’s Final Report; (ii) Discharging Receiver; and (iii) Dismissing Case.
      Further, the Order of the Court stated as follows: “On March 2, 2006, all of the
      real property of the Receivership Property was sold through a foreclosure sale
      (“Real Property Sale”). Laurus purchased the real property sold at the Real
      Property Sale.” “On March 23, 2006, all of the personal property of the
      Receivership Property was sold through a UCC sale (“Personal Property Sale”).
      Laurus purchased the personal property sold at the Personal Property Sale.”
“Following the Real Property Sale and the Personal Property Sale, substantially
      all of the Company’s assets have been sold to Laurus.” The loss of the assets
      included the loss of the ownership of five of our subsidiaries; All Star
      Beverage, Inc., All Star Beverages Arizona, Inc., All Star Beverages Jax, Inc.,
      All Star Beverages Mississippi, Inc., and Hawaiian Tropicals, Inc. Substantially
      all of our assets were sold, which had a significant negative impact on our
      Results of Operations. ***Our
      results of operations discussed for the year ended December 31, 2006 are not
      indicative of future operations since during the fourth quarter of 2005 we
      substantially ceased all operations and lost all assets due to the foreclosure
      process by Laurus in the first quarter of 2006.***












On
      November 23, 2005, we received a letter from the American Stock Exchange
      (“AMEX”) notifying us we were not in compliance with Sections 134, 1003(a)(iv),
      and 1101 of AMEX’s Company Guide. Pursuant to AMEX’s letter we were required to
      submit two plans, one by December 9 and the second one by December 23, 2005,
      advising AMEX on the action we planned to take to become compliant by January
      5,
      2006 and February 23, 2006. On January 11, 2006, we received notice from AMEX
      that we were not in compliance with their continued listing standards and that
      our securities were being delisted.





We
      incurred no revenues or expenses for the year ended December 31, 2006. Unless,
      we are able to make an acquisition with our stock or find a company with which
      to merge, we will not have revenue in the next reporting period or thereafter.
      We will, however, incur expenses to maintain our corporate estates and keep
      our
      Securities Act filings current.




**Personnel** ****





As
      of
      December 31, 2006 we had 1 full-time employee. We also used the service of
      independent consultants and contractors to perform various professional
      services. We believe the use of third-party service providers enhanced our
      ability to contain general and administrative expenses. Management believes
      our
      future success will depend in large part upon our ability to attract and retain
      qualified employees. We had no collective bargaining agreements with our
      employees and believe our relations with our employees are good.





**ITEM
      2.**  **DESCRIPTION
      OF PROPERTY**





As
      of
      December 31, 2006, American Water Star maintained its corporate headquarters
      at
      4560 South Decatur Blvd., Suite 301, Las Vegas, Nevada 89103. At that time
      we
      leased approximately 4,000 square feet of office space under a lease set to
      expire in April 2008. The minimum monthly rental for the premises was
      approximately $8,700, plus standard, ancillary charges, such as property taxes,
      insurance, and certain operating expenses applicable to the leased premises.
      The
      lease was subject to annual rent increases at a rate of four percent per annum.





In
      addition, we leased property at 4545 Cameron Street, Suites A and B, Las Vegas,
      NV 89103. We leased approximately 11,000 square feet of warehouse and 4,000
      square feet of office space under a lease, set to expire in October 2006. We
      initially used this property as our warehouse space and our accounting
      department before relocating the accounting office to our Arizona facility.
      Subsequently, we utilized this space for the operations of our subsidiary,
      C.R.D. of Nevada. The minimum monthly rental for the premises was approximately
      $8,900, plus standard, ancillary charges, such as property taxes, insurance,
      and
      certain operating expenses applicable to the leased premises. The lease was
      subject to an annual rent increase of approximately $300.





As
      previously mentioned, upon Laurus completing its foreclosure we lost all assets
      and no longer operate in any of the described properties. In May of 2007, we
      signed a one-year lease for a virtual executive suite in Henderson, Nevada
      whereby we currently pay $150 per month.












**ITEM
      3.**  **LEGAL
      PROCEEDINGS**





A
      court
      ordered settlement conference was held in December 2004 in which debtor
      entities, American Water Star, and creditors agreed to broad mutual releases
      between one another, including the release of any potential litigation involving
      the trademark infringement allegations. The conference resulted in a settlement
      agreement, wherein American Water Star would issue 400,000 shares of
      unrestricted, registered common stock designated to Water Star Bottling, Inc.,
      in exchange for consulting services and 100,000 shares of restricted common
      stock. In addition, Mr. Mohlman would release a lien he had on property located
      in Wyoming to the representative parties of Geyser Products. However, subsequent
      to the settlement conference, one of the parties that negotiated on behalf
      of
      Geyser Products has since denied his ability to act on behalf of Geyser and
      has
      refused to sign the settlement agreement. In response to his denial, American
      Water Star filed a motion for sanctions to compel the carrying out of the
      settlement in bankruptcy court and a continued hearing was held on April 27,
      2005. At the hearing an order enforcing the settlement agreement reached on
      December 14, 2004 was granted and the motion and counter-motion for sanctions
      was withdrawn. Additionally, the involuntary bankruptcy petition against Water
      Star Bottling, Inc. was dismissed and the involuntary bankruptcy petition
      against Geyser Products, LLC will no longer be contested.





On
      June
      10, 2005, the Company was served with a complaint styled Aaron Rents, Inc.,
      Plaintiff vs. Camelot Ltd., Inc., American Water Star, Inc., and All Star
      Beverages, Inc., Defendants, Circuit Court for Pike County, Mississippi, Case
      No. 05-173-PCS. Plaintiff alleged causes of action for breach of a real property
      lease and unlawful entry and detainer. Plaintiff sought the delivery of the
      premises and the attachment of property and the posting of a bond during the
      pendency of the proceeding. The Company believed that the allegations were
      without merit and intended to defend this matter vigorously. Counsel was
      retained in Mississippi to defend these allegations. The Company filed a
      response to the complaint prior to September 1, 2005. The matter resulted in
      a
      judgment in favor of the Company.





On
      November 4, 2005, Laurus again notified us that certain defaults had occurred
      in
      the Securities Purchase Agreement, including our failure to make interest
      payments on September 1, 2005, October 1, 2005 and November 1, 2005. In
      addition, we had failed to make principal and interest payments due to Laurus
      on
      August 1, 2005, September 1, 2005, October 1, 2005 and November 1, 2005. Based
      upon the occurrence and continuance of these defaults, Laurus notified us that
      they had accelerated the amounts due under the obligations, demanding payment
      in
      full on November 7, 2005 in the amount of $6,694,875. In the event the payment
      amount was not received by Laurus, foreclosure proceedings covered by the Deed
      of Trust would begin.





Subsequent
      to November 7, 2005, foreclosure proceedings were begun on all of our real,
      personal, tangible, and intangible property, including all buildings,
      structures, leases, fixtures, and moveable personal property. On March 2, 2006,
      all of the real property was sold through a foreclosure sale, and on March
      23,
      2006, all personal property was sold through a UCC sale. Pursuant to the Order
      of the Court, on or about April 3, 2006, the Superior Court of the State of
      Arizona in and for the County of Maricopa approved an order (i) Approving
      Receiver’s Final Report; (ii) Discharging Receiver; and (iii) Dismissing Case.
      Further, the Order of the Court stated as follows: “On March 2, 2006, all of the
      real property of the Receivership Property was sold through a foreclosure sale
      (“Real Property Sale”). Laurus purchased the real property sold at the Real
      Property Sale.” “On March 23, 2006, all of the personal property of the
      Receivership Property was sold through a UCC sale (“Personal Property Sale”).
      Laurus purchased the personal property sold at the Personal Property Sale.”
“Following the Real Property Sale and the Personal Property Sale, substantially
      all of the Company’s assets have been sold to Laurus.” The loss of the assets
      included the loss of All Star Beverage, Inc., All Star Beverages Arizona, Inc.,
      All Star Beverages Jax, Inc., All Star Beverages Mississippi, Inc., and Hawaiian
      Tropicals, Inc.












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





We
      did
      not submit any matters to a vote of our security holders during the fourth
      quarter of the fiscal year 2006.





**PART
      II**





**ITEM
      5.**  **MARKET
      FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
      PURCHASES OF EQUITY SECURITIES**





**a)
      Market Information**





In
      June
      of 2004 **,** our
      common stock was approved for listing and trading on the American Stock Exchange
      under the symbol “AMW.” Prior to being listed on the American Stock Exchange,
      our common stock was quoted on the OTC Bulletin Board under the symbol “AMWS.”
Our common stock began being quoted on the OTC Bulletin Board in December 2000.





On
      June
      18, 2004 we were listed on the American Stock Exchange and therefore the second
      quarter includes OTC Bulletin Board high and low bid prices from April 1, 2004
      to June 17, 2004 and American Stock Exchange sales prices from June 18, 2004
      to
      June 30, 2004. The third quarter of 2004 lists only the high and low sales
      prices as reported by the American Stock Exchange.





On
      November 23, 2005, we received a letter from the American Stock Exchange
      (“AMEX”) notifying us we were not in compliance with Sections 134, 1003(a)(iv),
      and 1101 of AMEX’s Company Guide. Pursuant to AMEX’s letter we were required to
      submit two plans, one by December 9 and the second one by December 23, 2005,
      advising AMEX on the action we planned to take to become compliant by January
      5,
      2006 and February 23, 2006. On January 11, 2006, we received notice from AMEX
      that we continued to not be in compliance with their continued listing standards
      and that are securities were subject to delisting. As a result of being delisted
      from AMEX we are unable to locate historical quotes for that time period.





PERIOD
            HIGH
            LOW2005(1)First
                Quarter
            $0.48
            $0.43Second
                Quarter
            $0.32
            $0.18Third
                Quarter
            $0.25
            $0.22Fourth
                Quarter
            $0.05
            $0.032004First
                Quarter
            OTC
            $2.03
            OTC
            $1.26Second
                Quarter(1)
            OTC
            $1.72
            OTC
            $1.05AMEX
            $1.35
            AMEX
            $1.07Third
                Quarter
            AMEX
            $1.02
            AMEX
            $0.67Fourth
                Quarter
            AMEX
            $0.85
            AMEX
            $0.45









(1)
      As a
      result of being delisted from AMEX and having difficulty in locating the
      historical quotes for the 2005 year, we have shown the high and low quotes
      as of
      the last date in the quarter retrieved from www.bigcharts.com .


(2)
      We
      were quoted on the OTC Bulletin Board until June 17, 2004; therefore the second
      quarter of 2004 will be spilt between the OTC high and low bids and the American
      Stock Exchange high and low sales prices. The OTC quotes for the second quarter
      of 2004 are from April 1, 2004 through June 17, 2004. Subsequently we were
      listed on the American Stock Exchange on June 18, 2004 and therefore the high
      and low sales prices for the second quarter of 2004 are for the dates from
      June
      18, 2004 through June 30, 2004.


**(b)
      Holders of Common Stock**





As
      of
      December 31, 2006, we had approximately 670 stockholders of record of the
      92,744,525 shares of common stock outstanding.





**(c)
      Dividends**





We
      have
      never paid dividends on our Common Stock. We intend to follow a policy of
      retaining earnings, if any, to finance the growth of the business and do not
      anticipate paying any cash dividends in the foreseeable future. The declaration
      and payment of future dividends on the Common Stock will be at the sole
      discretion of the Board of Directors and will depend on our profitability and
      financial condition, capital requirements, statutory and contractual
      restrictions, future prospects and other factors deemed relevant.





*New
      Age Spin-Off*





In
      December of 2003, our Board of Directors declared a dividend to stockholders
      of
      record on March 15, 2004, in the form of all of the common stock of New Age,
      one
      of our wholly owned subsidiaries. As of the date of this report, the dividend
      has not been paid.





**(d)
      Securities Authorized for Issuance under Equity Compensation Plans**





On
      December 27, 2002, we adopted a Stock Plan that allowed for 10,000,000 shares
      of
      common stock to be issued for stock awards or pursuant to the exercise of stock
      options. The purpose of the plan was to compensate officers, directors,
      employees, consultants, and certain other persons providing bona fide services
      to American Water Star or to compensate officers, directors, and employees
      for
      accrual of salary through the award of the our common stock. The authority
      to
      determine and oversee the administration of the plan was the Board of Directors.
      On March 1, 2004, we amended the Stock Plan which increased the allowance of
      10,000,000 shares to 30,000,000 million shares.












Plan
                Category
            
            Number
              of
                shares 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 shares remaining available for future issuance under equity
                compensation plans (excluding shares reflected in column (a))
              (c)Equity
                compensation plans approved by stockholders
            
            0
            
            $0.00
            
            0Equity
                compensation plans not approved by stockholders
            
            600,000(1)
            
            $0.77
            
            12,111,140Total
            
            600,000
            
            $0.77
            
            12,111,140


(1)
            The
                directors as of August 17, 2004 all received options of 120,000 shares
                at
                an exercise price of $0.77.





**Recent
      Sales of Unregistered Securities**





On
      November 11, 2005, we authorized the issuance of 40,000 shares of our common
      stock pursuant to a subscription agreement and received $10,000. As of the
      date
      of this filing, the shares have not been issued.





On
      December 31, 2005, we authorized the issuance of 33,333,333, shares of common
      stock to the Roger Mohlman Nevada Trust as conversion for notes payable to
      our
      CEO, Roger Mohlman. On January 1, 2006, the shares were issued.





Subsequent
      Issuances





On
      January 23, 2006, we issued 6,000,000 shares of common stock to Redwood
      Consultants, LLC for services performed.





We
      believe that the issuance of the shares described above were exempt from
      registration and prospectus delivery requirements of the Securities Act of
      1933
      by virtue of Section 4(2). The shares were issued directly by us and did not
      involve a public offering or general solicitation. The recipients of the shares
      were afforded an opportunity for effective access to our files and records
      that
      contained the relevant information needed to make their investment decision,
      including our financial statements and 34 Act reports. We reasonably believed
      that the recipients, immediately prior to granting the shares, had such
      knowledge and experience in our financial and business matters that they were
      capable of evaluating the merits and risks of their investment. The recipients
      had the opportunity to speak with our management on several occasions prior
      to
      their investment decision.












Recent
      Issuances of Securities Registered Pursuant to Form S-8





The
      following lists shows the shares issued from a Registration Statement on Form
      S-8 filed on October 31, 2005.





**Person
                Issued to**
            **Date
                of Issuance**
            **Number
                of Shares**Daniel
                Hollis
            November
                10, 2005
            2,000,000Jens
                Dalsgaard
            November
                10, 2005
            1,000,000Jens
                Dalsgaard
            January
                1, 2006
            1,000,000James
                Hibbert
            February
                23, 2006
            1,487,500Sean
                Flanagan
            March
                28, 2006
            2,287,500











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





**OVERVIEW
      AND OUTLOOK**





American
      Water Star was started as a company which developed, marketed, sold, and
      distributed bottled water with four branded beverages: Hawaiian Tropic, Geyser
      Fruit, Geyser Sport, and Geyser Fruta. The products were orientated to the
      health conscious consumer looking for an alternative to products containing
      high
      sugar and caffeine levels. Our customers included single and multi-store retail
      operations, governmental agencies, and distributors who in turn sell to retail
      stores, convenience stores, schools and other outlets. In addition, we branched
      into the private label and co-packing industries in the fourth quarter of
      2004.




We
      initially sold our products exclusively through distributors who then supplied
      our products to retailers. Although we continued to use distributors, we also
      expanded our sales effort through sales directly to retailers. As of December
      31, 2005, we sold through distributors and directly to customers.





We
      had
      hoped the private label and co-packaging of beverages for other corporations
      would allows us to avoid costly marketing expenses that would otherwise be
      associated with brand development, launch, and continuing promotions.





**CURRENT
      OPERATIONS**





During
      the third quarter of 2005, we entered into a “Forbearance Agreement” with Laurus
      Master Fund (“Laurus”) as a result of having previously defaulted on our initial
      agreements with Laurus dated as of October 2004. Pursuant to the Forbearance
      Agreement, Laurus agreed to forbear taking action on our existing defaults
      until
      October 26, 2007, provided that we did not default under the new Forbearance
      Agreement. In consideration for the Forbearance Agreement, we issued a Secured
      Convertible Term Note in the principal amount of $1,286,098.61, which
      represented the aggregate accrued interest and fees owed to Laurus as of July
      31, 2005.












On
      September 15, 2005, Laurus notified us that certain Events of Default had
      occurred under the second note and demanded payment of approximately $207,458
      by
      September 21, 2005.





Although
      our operations continued through the third quarter of 2005, the impact of the
      Laurus debt which was in default by the end of the third quarter was having
      a
      negative impact on our ability to continue operations as previously planned.
      Most of our operations had completely ceased by the fourth quarter of 2005.





On
      November 4, 2005, Laurus again notified us that certain defaults had occurred
      in
      the Securities Purchase Agreement, including our failure to make interest
      payments on September 1, 2005, October 1, 2005 and November 1, 2005. In
      addition, we had failed to make principal and interest payments due to Laurus
      on
      August 1, 2005, September 1, 2005, October 1, 2005 and November 1, 2005. Based
      upon the occurrence and continuance of these defaults, Laurus notified us that
      they had accelerated the amounts due under the obligations, demanding payment
      in
      full on November 7, 2005 in the amount of $6,694,875. In the event the payment
      amount was not received by Laurus, foreclosure proceedings covered by the Deed
      of Trust would begin.





Subsequent
      to November 7, 2005, foreclosure proceedings were begun on all of our real,
      personal, tangible, and intangible property, including all buildings,
      structures, leases, fixtures, and moveable personal property.








**SUBSEQUENT
      EVENTS**





On
      March
      2, 2006, all of the real property was sold through a foreclosure sale, and
      on
      March 23, 2006, all personal property was sold through a UCC sale. Pursuant
      to
      the Order of the Court, on or about April 3, 2006, the Superior Court of the
      State of Arizona in and for the County of Maricopa approved an order (i)
      Approving Receiver’s Final Report; (ii) Discharging Receiver; and (iii)
      Dismissing Case. Further, the Order of the Court stated as follows: “On March 2,
      2006, all of the real property of the Receivership Property was sold through
      a
      foreclosure sale (“Real Property Sale”). Laurus purchased the real property sold
      at the Real Property Sale.” “On March 23, 2006, all of the personal property of
      the Receivership Property was sold through a UCC sale (“Personal Property
      Sale”). Laurus purchased the personal property sold at the Personal Property
      Sale.” “Following the Real Property Sale and the Personal Property Sale,
      substantially all of the Company’s assets have been sold to Laurus.” The loss of
      the assets included the loss of the ownership of five of our subsidiaries;
      All
      Star Beverage, Inc., All Star Beverages Arizona, Inc., All Star Beverages Jax,
      Inc., All Star Beverages Mississippi, Inc., and Hawaiian Tropicals, Inc.
      Substantially all of our assets were sold, which had a significant negative
      impact on our Results of Operations.












**Results
      of Operations for the Years Ended December 31, 2006 and
      2005.**





Due
      to
      our assets being foreclosed upon and as a result of our discontinued operations,
      our consolidated statement of operations does not show any values for the
      comparable period of December 31, 2006 to December 31, 2005. As a result of
      not
      presenting comparable periods for the years ended December 31, 2006 and 2005,
      we
      have omitted any comparable period tables or discussion except for the net
      loss.
      We do not believe an analysis of comparable periods would be an accurate
      portrayal of operations since as of December 31, 2005 we had ceased our
      operations and were amidst the foreclosure process with Laurus.





We
      incurred no revenues or expenses for the year ended December 31, 2006 or 2005.
      Unless, we are able to make an acquisition with our stock or find a company
      with
      which to merge, we will not have revenue in the next reporting period or
      thereafter. We will, however, incur expenses to maintain our corporate estates
      and keep our Securities Act filings current.





**LIQUIDITY
      AND CAPITAL RESOURCES**





The
      following table summarizes total current assets, liabilities and working capital
      at December 31, 2006 compared to December 31, 2005.





December
                31, 2006
            December
                31, 2005
            **Increase
                / (Decrease)****$**
            **%**Current
                Assets
            $0
            $83,690
            $(83,690)
            (100%)Current
                Liabilities
            $7,628,076
            $10,182,322
            (2,470,556)
            160%Working
                Capital (Deficit)
            $(7,628,076)
            $(10,098,632)
            $2,386,866
            76.4%





As
      of
      December 31, 2006 we had a working deficit of $7,628,076 compared to working
      deficit of $10,098,632 as of December 31, 2005, a change of $2,386,866. The
      increase in working capital resulted from a decrease of current liabilities.





As
      of
      December 31, 2006 we had no cash on hand.







**Off-Balance
      Sheet Arrangements**





We
      do not
      have any off-balance sheet arrangements that have or are reasonably likely
      to
      have a current or future effect on our financial condition, changes in financial
      condition, revenues or expenses, results of operations, liquidity, capital
      expenditures or capital resources that is material to investors.





**Going
      Concern**





The
      accompanying financial statements have been prepared on a going concern basis,
      which contemplates the realization of assets and the satisfaction of liabilities
      in the normal course of business. As shown in the financial statements, during
      the years ended December 31, 2006 and 2005, the Company incurred losses from
      discontinued operations of $5,227,473 and $16,835,636, respectively. The
      financial statements do not include any adjustments relating to the
      recoverability and classification of liabilities that might be necessary should
      the Company be unable to continue as a going concern.





It
      is the
      intent of management and significant stockholders to provide sufficient working
      capital necessary to support and preserve the integrity of the corporate entity.
      However, no form commitments or arrangements to advance or loan funds to the
      Company or repay any such advances or loans exist. There is no legal obligation
      for either management or significant stockholders to provide additional future
      funding.
















**ITEM
      7.**  **FINANCIAL
      STATEMENTS**





See
      Index
      to Financial Statements and Financial Statement Schedules appearing on page
      F-1
      through F-21 of this Form 10-KSB.





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





On
      February 24, 2005, we dismissed Kelly & Company as our principal independent
      accountant and appointed Weaver and Martin LLC as our principal independent
      accountant.





On
      February 1, 2007, American Water Star dismissed Weaver & Martin, LLC as its
      independent auditor and appointed L.L. Bradford & Company, LLC as American
      Water Star’s independent accountants for the years ended December 31, 2004 and
      2005. This is a change in accountants recommended by American Water Star’s Audit
      Committee and ratified by American Water Star’s Board of Directors. L.L.
      Bradford & Company, LLC was engaged by American Water Star on February 1,
      2006.





On
      May 8,
      2006, the Registrant dismissed L.L. Bradford & Company, LLC as its
      independent auditor and appointed Gruber & Company, LLC as their independent
      accountants for the years ending December 31, 2005 and 2006. This is a change
      in
      accountants recommended and approved by the Registrant’s Executive Management
      and the Registrant’s Board of Directors.





**ITEM
      8A.**  **CONTROLS
      AND PROCEDURES**





***Evaluation
      of Disclosure Controls and Procedures***





We
      maintain disclosure controls and procedures designed to ensure that information
      required to be disclosed in reports filed under the Securities Exchange Act
      of
      1934, as amended, is recorded, processed, summarized and reported within the
      specified time periods. As of the date of this filing, Roger Mohlman, our Chief
      Executive Officer and Principal Financial Officer, of evaluated the
      effectiveness of our disclosure controls and procedures pursuant to Exchange
      Act
      Rules 13a-15. Based upon his evaluation, Mr. Mohlman concluded that as of
      December 31, 2005, our disclosure controls and procedures were not effective
      in
      timely alerting him to material information required to be included in our
      periodic Securities and Exchange Commission filings at the reasonable assurance
      level due to the material weaknesses described below.












In
      light
      of the material weaknesses described below, we performed additional analysis
      and
      other post-closing procedures to ensure our consolidated financial statements
      were prepared in accordance with generally accepted accounting principles.
      Accordingly, we believe that the consolidated financial statements included
      in
      this report fairly present, in all material respects, our financial condition,
      results of operations and cash flows for the periods presented.





A
      material weakness is a control deficiency (within the meaning of the Public
      Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or
      combination of control deficiencies, that results in more than a remote
      likelihood that a material misstatement of the annual or interim financial
      statements will not be prevented or detected. Management has identified the
      following two material weaknesses which have caused management to conclude
      that,
      as of December 31, 2005, our disclosure controls and procedures were not
      effective at the reasonable assurance level:





1.
            We
                were unable to meet our requirements to timely file our Form 10-QSB
                for
                the period ended September 30, 2005; our Form 10-KSB for the year
                ended
                December 31, 2005; our quarterly reports on Form 10-QSB for the periods
                ended March 31, 2006, June 30, 2006 and September 30, 2006; our Form
                10-KSB for the year ended December 31, 2006; and our Form 10-QSB
                for the
                periods ended March 31, 2007 and anticipate filing our 10-QSB for
                the
                period ended June 30, 2007 late. Management evaluated the impact
                of our
                inability to timely file periodic reports with the Securities and
                Exchange
                Commission on our assessment of our disclosure controls and procedures
                and
                has concluded that the control deficiency that resulted in the inability
                to timely make these filings represented a material
                weakness.





2.
            We
                did not maintain a sufficient complement of finance and accounting
                personnel with adequate depth and skill in the application of generally
                accepted accounting principles as demonstrated by significant adjustments
                to our financial statements identified by our independent registered
                accounting firm in the preparation of this quarterly report. In addition,
                we did not maintain a sufficient complement of finance and accounting
                personnel to handle the matters necessary to timely file our Form
                10-KSB
                for the year ended December 31, 2005 and our Forms 10-QSB for the
                three
                months ended March 31, 2006, the six months ended June 30, 2006 and
                the
                nine months ended September 30, 2006, or the Form 10-KSB for year
                ended
                December 31, 2006, or the Form 10-QSB for the three months ended
                March 31,
                2007 and the six month ended June 30, 2007 will be late. Management
                evaluated the impact of our lack of sufficient finance and accounting
                personnel on our assessment of our disclosure controls and procedures
                and
                has concluded that the control deficiency that resulted in our lack
                of
                sufficient personnel represented a material
                weakness.
















***Remediation
      of Material Weaknesses***





To
      remediate the material weaknesses in our disclosure controls and procedures
      identified above, we are being assisted by outside accounting personnel. We
      do
      not believe that this outsourcing will be effective once we commence significant
      operations. As
      a
      result, our internal controls may continue to be inadequate or ineffective,
      which could cause our financial reporting to be unreliable and lead to
      misinformation being disseminated to the public. Investors relying upon this
      misinformation may make an uninformed investment decision. However,
      we believe, once funding is available and have established criteria by which
      we
      will retain the expertise required to provide adequate and effective financial
      reporting.





***Changes
      in Internal Control over Financial Reporting***





Except
      as
      noted above, there were no changes in our internal control over financial
      reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act,
      during our most recently completed fiscal quarter that have materially affected,
      or are reasonably likely to materially affect, our internal control over
      financial reporting.





**ITEM
      8B.**  **OTHER
      INFORMATION**





None.





**PART
      III**





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





Name
            Age
            TitleRoger
                Mohlman
            60
            President,
                CEO, Treasurer, ChairmanArthur
                de Joya(1)
            42
            Independent
                Director


(1)
            Mr.
                De Joya resigned from the Board of Directors and his position on
                any of
                the Board’s Committees on February 1,
                2006.





**Duties,
      Responsibilities, and Experience**





***Roger
      Mohlman*** has been
      the President, Treasurer, CEO and a Director of the Board of American Water
      Star
      since August of 2002. From 1986 to July 2002, Mr. Mohlman was the President
      of
      Camelot Ltd., LLC, a holding company for various businesses, including Rumours,
      Delizia, and Excalibur Awards. From January 1998 until June 2001, he was the
      CEO
      and President of Venda Tel, Inc. and Merlin Computers, manufacturers of slot
      machines and telco equipment and software. From 1981 to 1997, Mr. Mohlman was
      the owner of Pobeda Manufacturing, Inc. in Mexico, a licensee for manufacturing
      name-brand clothing for U.S. companies. Mr. Mohlman has over 30 years of
      experience in product licensing and business development. Prior to joining
      American Water Star, Mr. Mohlman in 2001 was found guilty of a misdemeanor
      for
      unlicensed practice of contracting in California. Mr. Mohlman currently devotes
      substantially all of his time to American Water Star and its subsidiaries.












On
      June
      28, 2004, American Water Star joined with other creditors and filed involuntary
      bankruptcy petitions against Geyser Products, LLC and Water Star Bottling,
      Inc.,
      in United States Bankruptcy Court, District of Nevada.




***Arthur
      de Joya*** **** was
      appointed to the Board on February 1, 2005 to fill the vacancy left by Mr.
      Lieberman’s resignation and serves on the all three committees of American Water
      Star. Upon Mr. Paisley’s resignation, Mr. de Joya was appointed as the Chairman
      of the Audit Committee. Subsequent to the year ending December 31, 2005, Mr.
      de
      Joya resigned from American Water Star’s Board of Directors and from all
      positions held on the Board of Directors’ Committees. He has over 13 years of
      experience in both public and private accounting, mainly working with publicly
      traded companies. Mr. de Joya is a Certified Public Accountant licensed in
      Nevada and since April 2003 he has worked as an independent accountant in Las
      Vegas at De Joya & Company, a certified public accounting and consulting
      firm. Prior to being an independent accountant, Mr. de Joya worked at L.L.
      Bradford & Company, LCC as a partner-in-charge of the audit practice for
      approximately five years. Mr. de Joya was employed for KMPG LLP working with
      many large publicly traded companies before he began work at L.L. Bradford
&
Company. Currently, Mr. de Joya serves as the Chief Financial Officer for
      GamezNFlix, Inc, a publicly traded company on the OTC Bulletin Board. Mr. de
      Joya has also served as a chief financial officer for a publicly traded mining
      company, Vista Continental Corporation. Mr. de Joya received his B.S. in
      Business Administration from the University of Nevada, Las Vegas and is a member
      of the American Institute of Certified Public Accountants and Nevada Society
      of
      Certified Public Accountants.




**Limitation
      of Liability of Directors**





Pursuant
      to the Nevada General Corporation Law, our Articles of Incorporation exclude
      personal liability for our Directors for monetary damages based upon any
      violation of their fiduciary duties as Directors, except as to liability for
      any
      breach of the duty of loyalty, acts or omissions not in good faith or which
      involve intentional misconduct or a knowing violation of law, or any transaction
      from which a Director receives an improper personal benefit. This exclusion
      of
      liability does not limit any right which a Director may have to be indemnified
      and does not affect any Director’s liability under federal or applicable state
      securities laws. We have agreed to indemnify our directors against expenses,
      judgments, and amounts paid in settlement in connection with any claim against
      a
      Director if he acted in good faith and in a manner he believed to be in our
      best
      interests.





Election
      of Directors and Officers .





Directors
      are elected to serve until the next annual meeting of stockholders and until
      their successors have been elected and qualified. Officers are appointed to
      serve until the meeting of the Board of Directors following the next annual
      meeting of stockholders and until their successors have been elected and
      qualified.





Our
      Executive Officers or Directors have not been the subject of any Order,
      Judgment, or Decree of any Court of competent jurisdiction, or any regulatory
      agency permanently or temporarily enjoining, barring, suspending or otherwise
      limiting him from acting as an investment advisor, underwriter, broker or dealer
      in the securities industry, or as an affiliated person, director or employee
      of
      an investment company, bank, savings and loan association, or insurance company
      or from engaging in or continuing any conduct or practice in connection with
      any
      such activity or in connection with the purchase or sale of any
      securities.





Our
      Executive Officers or Directors have not been convicted in any criminal
      proceeding (excluding traffic violations) nor are they the subject of a criminal
      proceeding which is currently pending.





Our
      Executive Officers or Directors have not been the subject of any pending legal
      proceedings.















**Section
      16(a) Beneficial Ownership Reporting Compliance**





Section
      16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
      requires our executive officers and directors, and persons who beneficially
      own
      more than ten percent of our common stock, to file initial reports of ownership
      and reports of changes in ownership with the SEC. Executive officers, directors
      and greater than ten percent beneficial owners are required by the SEC
      regulations to furnish us with copies of all Section 16(a) forms they file.
      Based upon a review of the copies of such forms furnished to us and written
      representations from our executive officers and directors, we believe that
      as of
      the date of this filing, our CEO and President, Roger Mohlman, was current
      in
      his reports under this section.





**Audit
      Committee**





Prior
      to
      June 17, 2004, we did not have an Audit Committee and our board of directors
      performed the necessary functions of an Audit Committee, such as: recommending
      a
      firm of independent certified public accountants to audit the annual financial
      statements; reviewing the independent auditors independence, the financial
      statements, and their audit report; and reviewing management’s administration of
      the system of internal accounting controls.





On
      June
      17, 2004, we established and appointed members of the Board to the Audit
      Committee in accordance with section 3(a)(58)(A) of the Securities Exchange
      Act
      of 1934. The Audit Committee initially was comprised of two directors; Messrs.
      Paisley (Chairman) and Lieberman. On January 31, 2005, Mr. Lieberman resigned
      as
      a director and a member of the Audit Committee. The board of directors for
      American Water Star appointed Mr. Arthur de Joya to fill the vacancies left
      by
      Mr. Lieberman’s resignation. On March 8, 2005, Mr. Paisley resigned as the
      Chairman of the Audit Committee and the Board appointed Mr. de Joya to serve
      as
      the new Chairman and appointed Dr. DeBruin to serve as a member of the Audit
      Committee. None of the members of the Audit Committee were or had been our
      officers or employees, and each member qualified as an independent director
      as
      defined by Section
      121B(2)(c) of
      the
      American Stock Exchange Company and Section 10A(m) of the Securities Exchange
      Act of 1934, and Rule 10A-3 thereunder.





Upon
      Mr.
      de Joya’s resignation in February 2006 and as a result of no longer being traded
      on the AMEX, we no longer have an Audit Committee. At the time of this filing,
      we only have one officer and director so we are not able to have an independent
      Audit Committee. Our board of directors will perform some of the same functions
      of an Audit Committee, such as: recommending a firm of independent certified
      public accountants to audit the annual financial statements; reviewing the
      independent auditors independence, the financial statements and their audit
      report; and reviewing management's administration of the system of internal
      accounting controls. If and when we are able to reestablish operations and
      able
      to appoint new members to the Board of Directors, we will reestablish the
      various board committees such as the Audit Committee.





**Code
      of Ethics**





A
      code of
      ethics relates to written standards that are reasonably designed to deter
      wrongdoing and to promote:







(1)
            Honest
                and ethical conduct, including the ethical handling of actual or
                apparent
                conflicts of interest between personal and professional
                relationships;


(2)
            Full,
                fair, accurate, timely and understandable disclosure in reports and
                documents that are filed with, or submitted to the Commission and
                in other
                public communications made by an
                issuer;


(3)
            Compliance
                with applicable governmental laws, rules and
                regulations;


(4)
            The
                prompt internal reporting of violations of the code to the Audit
                Committee; and


(5)
            Accountability
                for adherence to the code.





We
      adopted a corporate code of ethics that applies to our principal executive
      officer, principal financial officer, principal accounting officer or
      controller, or persons performing similar functions in that our officers and
      directors serve in all the above capacities. We will provide an electronic
      or
      paper copy of the code of ethics free of charge, upon request made to our
      Company Secretary. If any substantive amendments are made to the written code
      of
      ethics, or if any waiver (including any implicit waiver) is granted from any
      provision of the code to our Chief Executive Officer, Chief Financial Officer
      or
      Corporate Controller, we will disclose the nature of such amendment or waiver
      in
      a report on Form 8-K.












**Nominating
      Committee**





Prior
      to
      June 17, 2004, we did not have a Nominating and Corporate Governance Committee
      Charter. Our board of directors performed the necessary functions associated
      with a Nominating and Corporate Governance Committee.





After
      June 17, 2004, we drafted a Nominating and Corporate Governance Committee
      Charter and appointed members of the Board to the Committee. The Nominating
      and
      Corporate Governance Committee was initially with Messrs. Paisley, Lieberman,
      and Dr. DeBruin, however since the resignation of Mr. Lieberman and Mr. Paisley,
      Mr. de Joya joined Dr. DeBruin as a member of the committee. Each member of
      the
      Nominating and Corporate Governance Committee qualified as an independent
      director as defined by Section 121 of the American Stock Exchange Company Guide.
      Upon the resignations of Dr. DeBruin and Mr. de Joya, we no longer have a
      standing Nominating and Corporation Governance Committee.





As
      a
      result of only having one sole officer and director we do not have the resources
      to have a Nominating and Corporate Governance Committee. Our board of directors
      will perform some of the functions associated with a Nominating Committee while
      we recommence our operations and until we are able to appoint additional members
      to the Board of Directors who would qualify to serve on the Nominating and
      Corporate Governance Committee.





**ITEM
      10.**  **EXECUTIVE
      COMPENSATION**





**(a)
      General**





The
      following table sets forth information concerning the total compensation that
      we
      have paid or that has accrued on behalf of our chief executive officer and
      other
      executive officers with annual compensation exceeding $100,000 during the most
      recent fiscal year ending December 31, 2006 and for the fiscal years ending
      December 31, 2005 and 2004. The remuneration described in the table does not
      include the cost of American Water Star’s benefits furnished to the named
      executive officers, including premiums for health insurance and other benefits
      provided to such individuals that are extended in connection with the conduct
      of
      American Water Star’s business.





**(b)
      Summary Compensation Table**





Name
                and Principal Position
            Year
            Annual
                Compensation
            Long
                Term CompensationSalary
            Bonus
            Other
                Annual
              Compen-sation
            Awards
            Payouts
            All
                other compen-sationRestricted
              Stock
            Options
            LTIP
              payoutsRoger
                Mohlman (1)
              Chief
                Executive Officer and President
            2006
              
              2005
              2004
              2003
            $-0.00
              
              $-0-
              $399,600
              $162,500
            -0-
              
              -0-
              -0-
              -0-
            -0-
              
              -0-
              -0-
              -0-
            $-0-
              
              $-0-
              $362,000
              -0-
            $-0-
              
              $-0-
              $55,320
              -0-
            -0-
              
              -0-
              -0-
              -0-
            -0-
              
              -0-
              -0-
              -0-


(1)
      Mr.
      Mohlman has served as Chief Executive Officer, President, and director of
      American Water Star since June 2002. In July 2003, he was also named Chairman
      of
      the Board and Chief Financial Officer of American Water Star. Mr. Mohlman’s
      salary was accrued for American Water Star’s 2003 and 2004 fiscal years. The
      2003 amount was paid in April and $298,600 of the 2004 amount was paid. In
      February 2004, Mr. Mohlman received 200,000 shares of American Water Star’s
      common stock pursuant to our stock plan in consideration of his services to
      American Water Star in 2002 and 2003.












**(c)** **Option
      Grant Table**





**Stock
      Option Grants**





We
      maintained a consultant and employee stock compensation plan at American Water
      Star to compensate officers, directors, employees, consultants, and certain
      other persons providing bona fide services to American Water Star or to
      compensate officers, directors, employees for accrual of salary, through the
      award of our common stock. The effective date of the stock plan is December
      27,
      2002 and was later amended in March of 2004. The following table includes the
      current options granted as of December 31, 2006.





On
      August
      17, 2004, in accordance with Section 5 of American Water Star’s Stock Plan, the
      Board of Directors granted to each of its directors options, pursuant to a
      Grants of Options Agreement, to purchase up to 120,000 shares of its common
      stock at the exercise price of $0.77 per share.





**EXECUTIVE
      OFFICER/DIRECTOR OPTION GRANTS**





Name
            Year
            Number
                of securities underlying options granted
            
            Percent
                of total options granted to employees in fiscal year
            
            Exercise
                or base price ($/Share)
            
            Expiration
                DateRoger
                Mohlman
            2004
            120,000
            
            20%
            
            $0.77
            
            08/17/2009





**(d)
      Aggregated Option Exercises and Fiscal Year-End 2006 and** **Fiscal Year-End 2005**


Name
            Year
            Shares
                acquired on exercise (#)
            
            Value
                Realized ($)
            
            Number
                of Securities underlying unexercised options at December 31,
                2006
            
            Value
                of unexercised options at December 31, 2005Roger
                Mohlman
            2004
            0
            
            0
            
            0
            
            0





**AGGREGATED
      OPTION EXERCISES** **IN
      FISCAL YEAR AND OPTION VALUES**





**(f)
      Compensation of Directors**





During
      the 2006 year we did not give our directors any compensation for their services
      as a director.














**(g)
      Employment contracts and termination of employment and change-in-control
      arrangements.**





***Roger
      Mohlman*** *:* Effective
      January 1, 2003, we entered into an employment agreement with Roger Mohlman
      to
      serve as our President and CEO. Prior to that date, Mr. Mohlman did not have
      an
      employment agreement. The term of the employment contract was for one year
      from
      the effective date. The contract could be extended for an additional two years
      upon both parties mutual consent. The initial annual base compensation for
      2003
      was set at $120,000 (subject to increase by the Board of Directors), stock
      options, annual bonus in accordance with American Water Star’s performance, and
      various benefits. In February 2004, pursuant to a resolution of the Board,
      the
      employment agreement was extended for two years and Mr. Mohlman's base salary
      was set at $240,000. In 2003, we accrued the $120,000 base salary and awarded
      Mr. Mohlman compensation of approximately $42,500 for his services to us
      commencing in August 2002, all of which compensation was paid in April 2004.
      During the year ended December 31, 2004, we accrued $101,015 in compensation
      for
      Mr. Mohlman and during the years 2005 and 2006 did not accrue any
      compensation.





**Termination
      of Employment**





There
      are
      no compensatory plans or arrangements, including payments to be received from
      American Water Star, with respect to any of our executives officers, set out
      above which would in any way result in payments to any such person because
      of
      his resignation, retirement, or other termination of such person’s employment
      with American Water Star, or any change in control of American Water Star,
      or a
      change in the person’s responsibilities following a change in control of
      American Water Star.





**COMPENSATION
      COMMITTEE**





Prior
      to
      June 17, 2004, we did not have a Compensation Committee Charter and the Board
      performed the necessary functions related to compensation. Subsequent June
      17,
      2004, a Compensation Committee Charter was approved and members of the Board
      were appointed to the Committee. The Compensation Committee was comprised of
      two
      directors: Messrs. De Joya and Dr. DeBrun. Each member of the Compensation
      Committee qualified as an independent director as defined by Section
      121 of the
      American Stock Exchange Company Guide.





As
      a
      result of currently only having one sole officer and director we do not have
      the
      resources to have a Compensation Committee. Our board of directors will perform
      some of the functions associated with Compensation Committee if we are able
      to
      recommence our operations and until we are able to appoint additional members
      to
      the Board of Directors who would qualify to serve on a Compensation Committee.





The
      Compensation Committee will have the responsibility to develop guidelines for,
      evaluate and approve cash and equity compensation and benefit plans, programs,
      and agreements for our Chief Executive Officer and other executive officers;
      to
      administer our stock incentive plans; and to develop and review the Company’s
      compensation philosophy.












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





The
      following table presents information, to the best of our knowledge, about the
      beneficial ownership of our common stock on July 16, 2007, held by those persons
      known to beneficially own more than 5% of our capital stock and by our directors
      and executive officers.





The
      percentage of beneficial ownership for the following table is based on 136,852,858  shares
      of
      common stock outstanding as of July 16, 2007. Beneficial
      ownership is determined in accordance with the rules of the Securities and
      Exchange Commission and does not necessarily indicate beneficial ownership
      for
      any other purpose. Under these rules, beneficial ownership includes those shares
      of common stock over which the stockholder has sole or shared voting or
      investment power. It also includes (unless footnoted) shares of common stock
      that the stockholder has a right to acquire within 60 days after July 16, 2007
      through the exercise of any option, warrant or other right. The percentage
      ownership of the outstanding common stock, however, is based on the assumption,
      expressly required by the rules of the Securities and Exchange Commission,
      that
      only the person or entity whose ownership is being reported has converted
      options or warrants into shares of our common stock.





*Security
      Ownership of Management and Certain Beneficial Owners*





Name
                and Address of Beneficial Owner(1),Officer, or Director
            
            Number
              of
                Shares(2)
            
            Percent
                of Ownership
              (3)Roger
                Mohlman,
              President,
                CEO, and Chairman (4)
            
            62,237,677
            
            45%Total
                of all Officers, Directors, and Beneficial Owners
            
            62,237,677
            
            45%





(1)
            As
                used in this table, “beneficial ownership” means the sole or shared power
                to vote, or to direct the voting of, a security, or the sole or shared
                investment power with respect to a security (i.e., the****power
                to dispose of, or to direct the disposition of, a security). All
                addresses
                are care of the Company, 4560 South Decatur Boulevard, Las Vegas,
                NV
                89103.


(2)
            The
                amount listed does not include 120,000 options granted to the directors
                as
                of August 17, 2004, which were to Roger Mohlman, Dale Barnhart, Dale
                Paisley, David Lieberman, and Dr. Mark
                DeBruin.


(3)
            Figures
                are rounded to the nearest tenth of a percent.


(4)
            This
                amount includes shares held in Mr. Mohlman’s name as well as those held in
                a Trust for Mr. Mohlman.





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





**ROGER
      MOHLMAN**





In
      June
      2004, IQ USA, Inc., a company which was to provide services to New Age
      Packaging, was incorporated, which initially listed Mr. Mohlman as an officer
      in
      error. Subsequently, Mr. Mohlman resigned and is no longer affiliated with
      IQ
      USA. Mr. Mohlman does not currently nor has he in the past had any ownership
      interest in IQ USA.





During
      the third quarter of 2004, we issued 1,888,889 shares of our common stock to
      Mr.
      Mohlman in cancellation of $1.7 million in cash advances made to us in the
      three-month period ended September 30, 2004. In addition, Mr. Mohlman loaned
      New
      Age, our wholly-owned subsidiary, $1,150,000 without interest or collateral
      which was due July 2005.





During
      the 2005 year, our Chairman, Chief Executive Officer and largest stockholder
      advanced $58,000 to the Company.












**ACQUISITION
      OF NEW AGE PACKAGING, INC.**





On
      December 23, 2002, we completed the acquisition of New Age Packaging, Inc.
      (then
      known as American Distribution & Packaging, Inc.), a privately-held Nevada
      corporation (“New Age”), pursuant to an Acquisition Agreement dated December 23,
      2002. Pursuant to that Agreement, New Age exchanged 100% of its outstanding
      common stock for 5,200,000 newly issued shares of our common stock. Upon
      completion of that acquisition, New Age became a wholly-owned subsidiary of
      American Water Star.





Although
      the consideration exchanged in the New Age acquisition was not negotiated at
      “arms-length,” our directors and executive officers deemed it reasonable based
      on certain criteria such as the valuation of the assets of New Age; New Age’s
      current and historical business operations; the potential of New Age; and the
      potential benefit to our stockholders. Our directors determined that the
      consideration for the exchange was reasonable under these
      circumstances.





The
      Board
      of Directors of American Water Star, on December 31, 2003, resolved to spin-off
      New Age to our stockholders of record as of March 15, 2004 as a stock dividend.
      As of the date of this report the spin-off has not occurred; although we still
      intend to complete the spin-off.




**ITEM
      13.**  **EXHIBITS**





**Incorporated
                by reference****Exhibit**
            **Exhibit
                Description**
            **Filed
                herewith**
            **Form**
            **Period
                ending**
            **Exhibit**
            **Filing
                date**3(i)(a)
            Articles
                of Incorporation
            
            10-KSB
            12/31/99
            3.1
            04/13/003(i)(b)
            Certificate
                of Amendment to the Articles of Incorporation
            
            10-KSB
            12/31/99
            3.2
            04/13/003(i)(d)
            Certificate
                of Amendment to the Articles of Incorporation
            
            10-QSB
            03/31/02
            3.4
            05/20/023(ii)(a)
            Bylaws
                of the Company
            
            10-KSB
            12/31/99
            3.3
            04/13/004.1
            Certificate
                of Change in Number of Authorized Shares
            
            S-8
            
            4.3
            04/05/024.2
            Certificate
                of Designation Series A Convertible Preferred Stock
            
            S-8
            
            4.4
            04/05/024.3
            Amended
                Stock Plan
            
            10-QSB
            09/30/04
            4.1
            11/19/044.4
            Securities
                Purchase Agreement with Laurus Master Fund, Ltd.
            
            8-K
            
            4.1
            11/04/044.5
            Registration
                Rights Agreement with Laurus Master Fund, Ltd.
            
            8-K
            
            4.2
            11/04/044.6
            Master
                Security Agreement with Laurus Master Fund, Ltd.
            
            8-K
            
            4.3
            11/04/044.7
            Subsidiary
                Agreement between All-Star Beverages and Laurus Master Fund,
                Ltd.
            
            8-K
            
            4.4
            11/04/0410.1
            Employment
                Agreement with Roger Mohlman
            
            10-KSB
            12/31/02
            10.4
            04/16/0310.2
            Trademark
                and Design License Agreement for use of Hawaiian Tropic
                name
            
            10-KSB
            12/31/02
            10.6
            04/16/0310.3
            Employment
                Agreement with Daniel Beckett
            
            8-K
            
            10
            05/19/0510.4
            Forbearance
                Agreement with Laurus Master Fund, Ltd.
            
            8-K
            
            10.1
            08/10/0510.5
            Secured
                Convertible Note with Laurus Master Fund, Ltd.
            
            8-K
            
            10.2
            08/10/0510.6
            Master
                Security Agreement with Laurus Master Fund, Ltd.
            
            8-K
            
            10.3
            08/10/0510.7
            Subsidiary
                Guarantee with Laurus Master Fund, Ltd
            
            8-K
            
            10.4
            08/10/0510.8
            Deed
                of Trust, Assignments of Rents, Security Agreement and Fixture Filing
                for
                the benefit of Laurus Master Fund
            
            8-K
            
            10.5
            08/10/0514.1
            Code
                of Ethics
            
            10-KSB
            12/31/02
            14.1
            04/16/0316.1
            Letter
                by L.L. Bradford & Company, LLC
            
            8-K/A
            
            16
            06/25/0716.2
            Letter
                by Weaver & Martin, LLC
            
            8-K/A
            
            16
            07/24/0720.1
            Notice
                of Trustee’s Sale
            
            8-K
            
            10.1
            12/29/0520.2
            Copy
                of the Statement of Breach or Non-Performance and Notice of Election
                to
                Sell
            
            8-K
            
            10.2
            12/29/0521
            List
                of Subsidiaries
            X31
            Certification
                of Roger Mohlman Chief Executive Officer, pursuant to Section 302
                of the
                Sarbanes-Oxley Act
            X32
            Certification
                of Roger Mohlman, Chief Executive Officer, pursuant to Section 906
                of the
                Sarbanes-Oxley Act
            X

















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




2006      2005




Audit
            $10,000
            $10,000Quarterly
                Review
            $15,000
            $15,000Tax
            $-0-
            $-0-Other
            $-0-
            $-0-TOTAL
            $25,000
            $25,000













(2)
      AUDIT-RELATED FEES






NONE






(3)
      TAX
      FEES






NONE






(4)
      ALL
      OTHER FEES






NONE






(5)
      AUDIT
      COMMITTEE POLICIES AND PROCEDURES






As
      of
      December 31, 2005, the Registrant no longer has an audit committee.






(6)
      If
      greater than 50 percent, disclose the percentage of hours expended on the
      principal accountant's engagement to audit the registrant's financial statements
      for the most recent fiscal year that were attributed to work performed by
      persons other than the principal accountant's full-time, permanent
      employees.






Not
      applicable.







**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on our behalf
      by
      the undersigned, thereunto duly authorized.














AMERICAN
      WATER STAR, INC.





By:





Roger
      Mohlman, Chief Executive Officer


(On
      Behalf of the Registrant and as the


Principal
      Financial Officer and


Principal
      Accounting Officer)





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated.

















Roger
      Mohlman


Chief
      Executive Officer, Director


December
      20, 2007





5


**Exhibit
      21**





**American
      Water Star, Inc’s Subsidiaries**





**Name
                of Subsidiary**
            **State
                of Incorporation**New
                Age Packaging, Inc.
            NevadaCRD
                of Nevada
            Nevada














**INDEX**









Page**REPORT
                  OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM:**Report
                  on audited consolidated financial statements
              F**-**1**FINANCIAL
                  STATEMENTS**Consolidated
                  balance sheets as of December 31, 2005 and 2004
              F-2Consolidated
                  statements of operations for the years ended December 31, 2005
                  and
                  2004
              F-3Consolidated
                  statements of stockholders' equity (deficit) for years ended December
                  31,
                  2005 and 2004
              F-4Consolidated
                  statements of cash flows for the years ended December 31, 2005
                  and
                  2004
              F-5Notes
                  to consolidated financial statements
              F-6
                  - F-21








E.
      Randall Gruber, CPA, PC


Certified
      Public Accountant Telephone (636)561-5639 121 Civic Center Drive, Suite 125
      Fax
      (636)561-0735


Lake
      Saint Louis, Missouri 63367





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**








**TO
      THE BOARD OF DIRECTORS AND STOCKHOLDERS OF**


**AMERICAN
      WATER STAR, INC. AND SUBSIDIARIES**





I
      have
      audited the accompanying consolidated balance sheets of American Water Star,
      Inc. and Subsidiaries as of December 31, 2006 and 2005 and the related
      consolidated statements of operations, stockholders’ deficit and cash flows for
      the years then ended. These consolidated financial statements are the
      responsibility of the Company’s management. My responsibility is to express an
      opinion on these consolidated financial statements based on my audits.





I
      conducted my audits in accordance with standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that I
      plan
      and perform the audit to obtain reasonable assurance about whether the
      consolidated 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. I believe that
      my
      audits provide a reasonable basis for our opinion.





In
      my
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of American Water Star, Inc.
      and Subsidiaries as of December 31, 2006 and 2005 and the results of its
      operations and cash flows for the years then ended 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 described in Note 2 and 7 to the
      consolidated financial statements conditions exist which raise substantial
      doubt
      about the Company’s ability to continue as a going concern unless it is able to
      generate sufficient cash flows to meet its obligations and sustain its
      operations. Those conditions raise substantial doubt about its ability to
      continue as a going concern. Management’s plans regarding those matters are also
      described in Note 2. The financial statements do not include any adjustments
      that might result from the outcome of this uncertainty.













Lake
      Saint Louis, Missouri


August
      29, 2007





Member:
      American Institute of Certified Public Accountants


Registered:
      Public Company Accounting Oversight Board (PCAOB)





F-1





**American
                Water Star, Inc.****Consolidated
                Balance Sheets**December
                31,
            
            December
                31,2006
            
            2005**Assets**Current
                assets:Cash
            
            $
            -
            
            $
            50,561Accounts
                receivable, net of allowance for doubtful accounts of
            
            
            -
            
            
            -$-0-
                and $112,251 at 12/31/06 and 12/31/05
            
            
            -
            
            
            33,129Total
                current assets
            
            
            -
            
            
            83,690Property,
                plant and equipment, net
            
            
            -
            
            
            6,932,351Other
                assets:Advances
                to related parties
            
            
            -
            
            
            478,266-
            
            
            
            
            
            7,494,307**Liabilities
                and Stockholder's Equity**Current
                liabilities:Accounts
                payable
            
            
            2,929,201
            
            
            1,048,916Accrued
                liabilities
            
            
            161,857
            
            
            1,387,933Accrued
                compensation - chairman and majority stockholder
            
            
            376,015
            
            
            -Current
                maturity of long-term debt
            
            
            -
            
            
            6,450,791Current
                portion of capital lease obligation -related party
            
            
            -
            
            
            785,159Advances
                from related parties
            
            
            4,161,003
            
            
            509,522Total
                current liabilities
            
            
            7,628,076
            
            
            10,182,322Stockholders'
                equityPreferred
                stock, $0.0001 par value, 20,000,000 sharesauthorized,
                no shares issued.
            
            
            -
            
            
            -Series
                A preferred convertible, 4,100,0000 sharesauthorized,
                no shares issued.
            
            
            -
            
            
            -Common
                stock, $0.0001 par value, 150,000,000 sharesauthorized,
                136,852,858 and 92,744,525 shares issuedand
                outstanding as of 3/31/06 and 12/31/05
            
            
            13,685
            
            
            9,274Stock
                bought or for services not issued 720,000 and 720,000shares
                at 3/31/06 and 12/31/05
            
            
            72
            
            
            72Common
                stock subscribed
            
            
            10,000
            
            
            10,000Stock
                issuance obligation
            
            
            -
            
            
            1,700,000Additional
                paid-in capital
            
            
            37,755,580
            
            
            35,772,579Accumulated
                (deficit)
            
            
            (45,407,413
            )
            
            (40,179,940
            )(7,628,076
            )
            
            (2,688,015
            )$-
            
            
            
            
            $
            7,494,307





See
      noted
      to consolidated financial statements


F-1








**American
                Water Star, Inc.****Consolidated
                Statements of Discontinued Operations****For
                the Years Ended****December
                31,****2006**
            
            **2005**Sales
            
            $
            35,589
            
            
            
            
            $
            2,642,232Cost
                of sales
            
            
            79,406
            
            
            
            
            
            1,252,556Gross
                profit
            
            
            (43,817
            )
            
            
            
            
            1,389,676Expenses:Depreciation
                and amortization
            
            
            --
            
            
            
            
            
            1,644,611General
                and administrative expenses
            
            
            2,000,647
            
            
            
            
            
            8,208,439Loss
                on disposal of discontinued operations
            
            
            3,178,244
            
            
            
            
            
            --Loss
                due to impairment of equipment, goodwill and inventory
            
            
            --
            
            
            
            
            
            5,182,483Total
                cost and expenses
            
            
            5,178,891
            
            
            
            
            
            15,035,533Net
                operating loss
            
            
            (5,222,708
            )
            
            
            
            
            (13,645,857
            )Other
                (expense):Interest
                (expense)
            
            
            (4,765
            )
            
            
            
            
            (3,189,779
            )Total
                other income (expense)
            
            
            (4,765
            )
            
            
            
            
            (3,189,779
            )Net
                loss
            
            
            (5,227,473
            )
            
            
            
            
            (16,835,636
            )Total
                loss per share
            
            $
            (0.04
            )
            
            
            
            $
            (0.20
            )Weighted
                average number ofcommon
                shares outstanding - basicand
                fully diluted
            
            
            135,764,316
            
            
            
            
            
            84,576,717





See
      noted
      to consolidated financial statements





F-1


**American
                Water Star, Inc.****Consolidated
                Statements of Changes in Stockholders' Equity**Unamortized
            
            
            
            StockAdditional
            
            
            
            cost
                of
            
            
            
            Earned
            
            Stock
            
            Common
            
            
            
            
            
            
            
            TotalCommon
                Stock
            
            
            
            Paid-in
            
            
            
            Shares
                Issued
            
            
            
            for
                Services
            
            Issuance
            
            Stock
            
            
            
            Accumulated
            
            
            
            Stockholders'Shares
            
            Amount
            
            
            
            Capital
            
            
            
            for
                Services
            
            
            
            Not
                Issued
            
            Obligation
            
            Subscribed
            
            
            
            (Deficit)
            
            
            
            EquityBalance,
                December 31, 2004
            
            
            
            
            
            80,227,858
            
            $
            8,023
            
            
            
            
            $
            32,864,840
            
            
            
            
            $
            (119,879
            )
            
            
            
            
            72
            
            
            -
            
            
            
            
            $
            -
            
            
            
            
            $
            (23,344,304
            )
            
            
            
            $
            9,408,752Warrants
                issued to Laurus forconvertible
                debenture
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            114,000
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            114,000Common
                stock subscribed
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            10,000
            
            
            
            
            
            
            
            
            
            
            
            10,000Amortization
                of unearned services
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,171,820
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,171,820Warrants
                issued for services
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            107,000
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            107,000Common
                stock issued for services
            
            
            
            
            
            12,516,667
            
            
            1,251
            
            
            
            
            
            2,686,739
            
            
            
            
            
            (1,051,941
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,636,049Stock
                issuance obligation to CEOto
                settle notes payable
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,700,000
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,700,000Net
                loss for the yearended
                December 31, 2005
            
            
            
            
            
            -
            
            
            -
            
            
            
            
            
            -
            
            
            
            
            
            -
            
            
            
            
            
            -
            
            
            -
            
            
            
            
            
            -
            
            
            
            
            
            (16,835,636
            )
            
            
            
            
            (16,835,636
            )Balance,
                December 31, 2005
            
            
            
            
            
            92,744,525
            
            $
            9,274
            
            
            -
            
            $
            35,772,579
            
            
            -
            
            $
            -
            
            
            -
            
            $
            72
            
            $
            1,700,000
            
            
            
            
            $
            10,000
            
            
            -
            
            $
            (40,179,940
            )
            
            -
            
            $
            (2,688,015
            )Paid-in
                capital adjustment
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,912
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,912Common
                stock issued for services
            
            
            
            
            
            10,775,000
            
            
            1,078
            
            
            
            
            
            284,422
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            285,500Common
                stock issued
            
            
            
            
            
            33,333,333
            
            
            3,333
            
            
            
            
            
            1,696,667
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,700,000
            )Net
                loss for the yearended
                December 31, 2006
            
            
            
            
            
            -
            
            
            -
            
            
            
            
            
            -
            
            
            
            
            
            -
            
            
            
            
            
            -
            
            
            -
            
            
            
            
            
            -
            
            
            
            
            
            (5,227,473
            )
            
            
            
            
            (5,227,473
            )Balance,
                December 31, 2006
            
            
            
            
            
            136,852,858
            
            $
            13,685
            
            
            
            
            $
            37,755,580
            
            
            
            
            $
            -
            
            
            
            
            $
            72
            
            $
            -
            
            
            
            
            $
            10,000
            
            
            
            
            $
            (45,407,413
            )
            
            
            
            $
            (7,628,076
            )


See
      noted
      to consolidated financial statements





F-1


**American
                Water Star, Inc.****Consolidated
                Statements of Cash Flows From Discontinued
                Operations****For
                the year ended****December
                31,****2006**
            
            **2005**Cash
                flows from operating activities:Net
                loss from discontinued operations
            
            $
            (5,227,473
            )
            $
            (16,835,636
            )Adjustments
                to reconcile net loss to net cash usedin
                operating activitiesDepreciation
                and amortization
            
            
            --
            
            
            1,644,611Impairment
                of fixed assets
            
            
            --
            
            
            1,654,949Impairment
                of inventory
            
            
            --
            
            
            3,416,825Stock
                issued for services
            
            
            285,500
            
            
            2,807,869Interest
                expense paid with shares of common stock
            
            
            --
            
            
            960,500Warrants
                issued to lender
            
            
            --
            
            
            221,000Changes
                in operating assets and liabilitiesAccounts
                receivable
            
            
            33,129
            
            
            603,027Inventories
            
            
            --
            
            
            (260,502
            )Prepaid
                expenses
            
            
            --
            
            
            197,835Deposits
                and other assets
            
            
            --
            
            
            791,052Accounts
                payable and accrued expenses
            
            
            1,676,476
            
            
            865,551Net
                cash used in operating activities
            
            
            (3,232,368
            )
            
            (3,932,919
            )**Cash
                flows from investing activities**Purchase
                of equipment
            
            
            --
            
            
            (12,645
            )Net
                cash provided (used) by investing activities
            
            
            --
            
            
            (12,645
            )**Cash
                flows from financing activities**Shares
                issued for debt - related partyStock
                subscription received
            
            
            (164,692
            )
            
            10,000Advances
                from related parties
            
            
            3,346,499
            
            
            2,645,091Proceeds
                from long-term debt
            
            
            --
            
            
            164,692Payment
                on capital lease obligations
            
            
            --
            
            
            (110,282
            )Net
                cash provided from financing activities
            
            
            3,181,807
            
            
            2,709,501Net
                increase (decrease) in cash
            
            
            (50,561
            )
            
            (1,236,063
            )Cash
                - beginning
            
            
            50,561
            
            
            1,286,624Cash
                - ending
            
            $
            --
            
            $
            50,561Supplemental
                disclosures:Interest
                paid
            
            $
            503,069
            
            $
            --Income
                taxes paid
            
            $
            --
            
            $
            --Supplemental
                schedule of noncash investing and financing activities:Long-term
                debt retired by foreclosure on property, plantand
                equipment
            
            $
            6,932,351
            
            $
            -Liabilities
                and accrued expenses assumed by related parties
            
            
            3,173,215
            
            
            -


See
      noted
      to consolidated financial statements








F-1





1.  Significant
      Accounting Policies





Nature
      of
      Business




The
      Company was originally organized on June 1, 1999 as American Career Centers,
      Inc. On April 2, 2002 we amended our Articles of Incorporation to change our
      name to American Water Star, Inc. We are engaged in the production and sale
      of
      multiple non-alcoholic, non-carbonated beverages.





Use
      of
      Estimates





The
      preparation of our consolidated financial statements requires us to make
      estimates and assumptions that affect the reported amounts of assets,
      liabilities, revenues and expenses, and the disclosures of contingent assets
      and
      liabilities in our consolidated financial statements and accompanying notes.
      Although these estimates are based on our knowledge of current events and
      actions we may undertake in the future, actual results may ultimately differ
      from estimates and assumptions.





Principles
      of Consolidation





The
      accompanying consolidated financial statements include the accounts of American
      Water Star, Inc. a Nevada corporation and its wholly owned subsidiaries, All
      Star Beverage, Inc., New Age Packaging and Distribution, Inc., and Colorado
      River Distribution, LLC and are prepared in accordance with accounting
      principles generally accepted in the United States. The accompanying financial
      statements reflect the results of operations and financial condition of


All
      Star
      Beverage, Inc., New Age Distribution, Inc. and Colorado River Distribution,
      LLC.





During
      2005, we entered into an agreement to purchase from Colorado River Distributors,
      LLC, the distribution rights of their Nevada division for the amount of
      $103,000. In addition to purchasing the distribution rights, we purchased the
      existing inventory of their Nevada Division for $55,216. Colorado River
      Distributors has distributing agreements for the paper products of Arrowhead
      Water, Coca Cola, Gatorade, and Tropicana.





As
      more
      fully described in notes 2 and 7, on March 2, 2006 and March 23, 2006, all
      of
      the Company’s personal and real property were sold through a UCC sale for the
      benefit of a secured creditor. Substantially all of the Company’s assets were
      sold and the Company was fully released and discharged from it’s obligation to
      Laurus Master Fund. Included in the assets was All Star Beverage, Inc. These
      financial statements include the operations of All Star Beverage, Inc. through
      March 2, 2006.




















Risks
      and
      Uncertainties





The
      Company’s operations could be adversely affected by restrictions on sources of
      supply; advertising effectiveness; changes in labeling requirements; changes
      in
      governmental regulations; changes in the rate of taxation; the expropriation
      of
      private enterprise; or product issues such as a product recall. The foregoing
      list of risks and uncertainties is not exclusive. We monitor our operations
      with
      a view to minimizing the impact to our overall business that could arise as
      a
      result of the risks inherent in our business.








Loss
      per
      Share





Net
      loss
      per share is provided in accordance with Statement of Financial Accounting
      Standards No. 128 (SFAS #128) “Earnings Per Share”. Basis loss per share is
      computed by dividing losses available to common stockholders by the weighted
      average number of common shares outstanding during the period. There were no
      securities considered to be dilutive in the computation of loss per
      share.





Trade
      Accounts Receivable





We
      record
      trade accounts receivable at net realizable value. This value includes an
      appropriate allowance for estimated uncollectible accounts to reflect any loss
      anticipated on the trade accounts receivable balances and charged to the
      provision for doubtful accounts. We calculate the allowance based on our history
      of write-offs, level of past due accounts based on the contractual terms of
      the
      receivables and our relationships with and economic status of our
      customers.





Inventories





Inventories
      consist of primarily of raw materials, supplies, concentrates and syrups and
      are
      valued at the lower of cost or market. We determine cost on the basis of average
      cost or first-in, first-out methods.





Stock
      Based Compensation





Common
      stock, warrants and options issued for services by non-employees is accounted
      for based on the fair market value at the date the services are performed.
      If
      the services are to be performed over a period of time the value is amortized
      over the life of the period that services are performed.





We
      account for our stock option plan in accordance with the provisions of SFAS
      No.
      123, “Accounting for Stock Based Compensation.” SFAS No. 123 permits entities to
      recognize as expense over the vesting period the fair value of all stock-based
      awards on the date of the grant.















Income
      Taxes





We
      account for income taxes under SFAS 109, “Accounting for Income Taxes”. The
      asset and liability approach requires the recognition of deferred tax
      liabilities and assets for the expected future tax consequences of temporary
      differences between the carrying amounts and the tax basis of assets and
      liabilities. The provision for income taxes differ from the amounts currently
      payable because of temporary differences in the recognition of certain income
      and expense items for financial reporting and tax reporting
      purposes.








Fair
      Value of Financial Instruments





The
      carrying value of current assets and liabilities reasonably approximates their
      fair value due to their short maturity periods. The carrying value of our debt
      obligations reasonably approximates there fair value at the stated interest
      rate
      approximates current market interest rates of debt with similar terms that
      is
      available to us.








Earnings
      per Common Share





SFAS
      No.
      128, “Earnings per Share” requires presentation of “basic” and “diluted.” This
      standard requires dual presentation of basic and diluted earnings per share
      on
      the face of the income statement for all entities with complex capital
      structures and requires a reconciliation of the numerator and denominator of
      the
      diluted loss per share computations.





Potentially
      issuable shares of common stock pursuant to outstanding stock options and
      warrants are excluded from the diluted computation, as their effect would be
      anti-dilutive.





Cash
      and
      Cash Equivalents





Cash
      and
      cash equivalents include cash in banks and certificates of deposit that mature
      within three months of the date of purchase.





Property,
      Plant and Equipment





We
      state
      property, plant and equipment at cost and depreciate such assets principally
      by
      the straight-line method over the estimated useful lives of the assets.
      Management assesses the recoverability of the carrying amount of property,
      plant
      and equipment if certain events or changes occur, such as a significant decrease
      in market value of the assets or a significant change in the business conditions
      in a particular market. The estimated useful lives of the assets or the lease
      term based on the following life expectancy:









LifeComputer
                  equipment
              5Software
              3Office
                  furniture and fixtures
              7Bottling
                  equipment
              7-10Leasehold
                  improvements
              Life
                  of leaseBuildings
              30








Depreciation
      commences upon implementation of the asset. Repairs and maintenance expenditures
      are charged to operations as incurred. Major improvements and replacements
      which
      extend the useful life of an asset, are capitalized and depreciated over the
      remaining estimated useful life of the asset. When assets are retired or sold,
      the costs and accumulated depreciation and amortization are eliminated and
      any
      resulting gain or loss is reflected in operations.





Derivative
      Financial Instruments





We
      account for derivative financial instruments in accordance with SFAS No. 133,
      “Accounting for Derivative Instruments and Hedging Activities,” as amended by
      SFAS No. 137, SFAS No. 138, and SFAS No. 149. Our Company recognizes all
      derivative instruments as either assets or liabilities at fair value in our
      consolidated balance sheets.





Advertising
      Costs





The
      Company expenses all costs of advertising as incurred. There were $-0- and
      $153,855 advertising costs included in general and administrative expenses
      as of
      December 31, 2006 and 2005.





Revenue
      Recognition





Revenue
      from the sale of our products is recorded when all of the following criteria
      are
      met:





Persuasive
      evidence of an arrangement exists,





Delivery
      has occurred or services have been rendered,





Our
      price
      to the buyer is fixed and determinable, and





Collectibility
      is reasonably assured.





Sales
      are
      recorded net of discounts, rebates and promotional costs.














Debt
      issue costs





Costs
      related to securing our long-term debt are recorded as an asset and are
      amortized over the life of the debt.





Long-lived
      Assets





We
      review
      the carrying value of long-lived assets at each balance sheet date if indication
      of impairment exists. Recoverability is assessed using undiscounted cash flows
      based upon historical results and current projections of earnings before
      interest and taxes. Impairment is measured using discounted cash flows of future
      operating results based upon a rate that corresponds to the cost of capital.
      Impairments are recognized in operating results to the extent that carrying
      value exceeds discounted cash flows of future operations. At December 31, 2005,
      we recognized an impairment expense in the amount of $1,662,658.





Recently
      Issued Accounting Standards


In
      February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments”. SFAS No. 155 amends SFAS No 133, “Accounting for
      Derivative Instruments and Hedging Activities”, and SFAS No. 140, “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities”. SFAS No. 155, permits fair value remeasurement for any hybrid
      financial instrument that contains an embedded derivative that otherwise would
      require bifurcation, clarifies which interest-only strips and principal-only
      strips are not subject to the requirements of SFAS No.
      133, establishes a requirement to evaluate interest in securitized financial
      assets to identify interests that are freestanding derivatives or that are
      hybrid financial instruments that contain an embedded derivative requiring
      bifurcation, clarifies that concentrations of credit risk in the form of
      subordination are not embedded derivatives, and amends SFAS No. 140 to eliminate
      the prohibition on the qualifying special-purpose


entity
      from holding a derivative financial instrument that pertains to a beneficial
      interest other than another derivative financial instrument. This statement
      is
      effective for all financial instruments acquired or issued after the beginning
      of the Company’s first fiscal year that begins after September 15, 2006.
      Management believes that this statement will not have a significant impact
      on
      the consolidated financial statements.





In
      March
      2006 FASB issued SFAS 156 “Accounting for Servicing of Financial Assets” this
      Statement amends FASB Statement No. 140, *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities,* with
      respect to the accounting for separately recognized servicing assets and
      servicing liabilities. This Statement:


1.
            Requires
                an entity to recognize a servicing asset or servicing liability each
                time
                it undertakes an obligation to service a financial asset by entering
                into
                a servicing contract.


2.
            Requires
                all separately recognized servicing assets and servicing liabilities
                to be
                initially measured at fair value, if
                practicable.


3.
            Permits
                an entity to choose “Amortization method” or Fair value measurement
                method’ for each class of separately recognized servicing assets and
                servicing liabilities:


4.
            At
                its initial adoption, permits a one-time reclassification of
                available-for-sale securities to trading securities by entities with
                recognized servicing rights, without calling into question the treatment
                of other available-for-sale securities under Statement 115, provided
                that
                the available-for-sale securities are identified in some manner as
                offsetting the entity’s exposure to changes in fair value of servicing
                assets or servicing liabilities a servicer elects to subsequently
                measure
                at fair value


.


Requires
      separate presentation of servicing assets and servicing liabilities subsequently
      measured at fair value in the statement of financial position and additional
      disclosures for all separately recognized servicing assets and servicing
      liabilities.












This
      Statement is effective as of the beginning of the Company’s first fiscal year
      that begins after September 15, 2006. Management believes that this statement
      will not have a significant impact on the consolidated financial
      statements.





In
      June,
      2006, the FASB issued FIN 48 “Accounting for Uncertainty in Income Taxes” (“FIN
      48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized
      in an enterprise’s financial statements in accordance with FASB Statement No.
      109, “Accounting for Income Taxes”. FIN 48 also provides guidance on
      derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition. FIN 48 is effective in fiscal years
      beginning after December 15, 2006. Management believes that this statement
      will
      not have a significant impact on the financial statements.





Reclassifications





Certain
      reclassifications have been made to prior periods to conform to current
      presentation .




2.  Going
      Concern




The
      accompanying financial statements have been prepared on a going concern basis,
      which contemplates the realization of assets and the satisfaction of liabilities
      in the normal course of business. As shown in the financial statements, during
      the years ended December 31, 2006 and 2005, the Company incurred losses from
      operations of $4,941,971 and $16,325,636, respectively. The financial statements
      do not include any adjustments relating to the recoverability and classification
      of liabilities that might be necessary should the Company be unable to continue
      as a going concern. As further discussed in Note 7, on November 4, 2005, Laurus
      Master Fund (“Laurus”)notified the Company that certain defaults had occurred in
      the Securities Purchase Agreement, including the Company’s failure to make
      interest payments on September 1, 2005, October 1, 2005 and November 1, 2005.
      In
      addition, the Company had failed to make principal and interest payments due
      to
      Laurus Master Fund on August 1, 2005, September 1, 2005, October 1, 2005 and
      November 1, 2005. Based upon the occurrence and continuance of the defaults,
      the
      Company was notified that Laurus had accelerated the amounts due under the
      obligations, demanding payment in full on November 7, 2005 in the amount of
      $6,694,875. In the event the payment amount was not received by Laurus by the
      due date, foreclosure proceedings covered by the Deed of Trust would begin.





Subsequent
      to November 7, 2005, foreclosure proceedings were begun on all of the Company’s
      real, personal, tangible, and intangible property, including all buildings,
      structures, leases, fixtures, and moveable personal property. On March 2, 2006,
      all of the real property was sold through a foreclosure sale, and on March
      23,
      2006, all personal property was sold through a UCC sale. Substantially all
      of
      the Company’s assets were sold and the Company was fully released and discharged
      from it’s obligation to Laurus.





3.
      Accounts Receivable





Trade
      accounts receivable are stated at the amount the Company expects to collect.
      The
      Company maintains allowances for doubtful accounts for estimated losses
      resulting from the inability of its customers to make required payments.
      Management considers the following factors when determining the collectibility
      of specific customer accounts; customer credit-worthiness, past transaction
      history, current economic and industry trends, and changes in customer payment
      terms. If the financial condition of the Company’s customers were to
      deteriorate, adversely affecting their ability to make payments, additional
      allowances would be required.












4.  Property,
      Plant and Equipment





Property,
      plant and equipment consisted of the following:







December
                  31,2006
              
              2005Bottling
                  and other equipment
              
              $
              -
              
              $
              6,977,986Office
                  equipment
              
              
              -
              
              
              531,638Furniture
                  and fixtures
              
              
              -
              
              
              80,192Website
              
              
              -
              
              
              357,589Vehicles
              
              
              -
              
              
              65,601Improvements
              
              
              -
              
              
              101,885Building
              
              
              -
              
              
              1,566,468Land
              
              
              -
              
              
              800,000-
              
              
              10,481,629Less
                  - Accumulated depreciation
              
              
              -
              
              
              (3,549,278
              )Total
                  property, plant and equipment
              
              
              -
              
              $
              6,932,351




Depreciation
      and amortization totaled $ -0-
      and
      $1,217,447 for the years ended December 31, 2006 and 2005.





5.
      Accrued Compensation and Notes Payable to the Chairman / CEO





Loans
      payable to the Chairman / CEO consist primarily of cash advances and at December
      31, 2004 the advances totaled $1,635,000. Each loan was non-interest bearing
      and
      was due on demand. The Company recorded accrued interest of $35,000 based upon
      a
      6% interest rate. On November 18, 2005, the Company’s Board of Directors
      authorized the Chairman’s / CEO’s request to convert the notes payable into
      shares of the Company’s common stock, reducing the Company’s liabilities by
      $1,700,000. The conversion was done on December 31, 2005 at $.03 per share
      based
      on the reported market price of the Company’s common shares on that
      date.


Accrued
      compensation totaled $ 376,015 and $ -0- at December 31, 2006 and
      2005.





6.
      Long-term Convertible Debt





On
      October 28, 2004, we issued a $5,000,000 secured convertible note (“Note”) to
      Laurus Master Fund, Ltd. (“Laurus”). The note was convertible into shares of our
      common stock at an initial conversion price of $0.57 per share. Pursuant to
      this
      agreement, we also issued to Laurus a warrant (“Warrant”) to purchase up to
      2,543,860 shares of our common stock at an exercise price of $0.66. The warrant
      expires on October 28, 2009. The unamortized cost of the warrants issued to
      Laurus of $322,515 accretes to interest expense over the period of the loan
      based on the interest method. The accreted amount of the unamortized cost of
      warrants was $290,116 and $32,399 for the years ended December 31, 2005 and
      2004, and these amounts were reported as interest expense. There was a
      beneficial conversion feature to the convertible note totaling $234,796 based
      on
      the difference between the conversion price and the trading price of our common
      stock. For the years ended December 31, 2005 and 2004, the amount of accretion
      to interest expense resulting from the beneficial conversion was $224,075 and
      $10,721.












The
      Note
      had a term of three years and accrued interest at the prime rate plus 3% per
      year. All of our assets serve as security for this Note. Interest on the
      principal amount was payable monthly, in arrears, on the first business day
      of
      each calendar month commencing December 1, 2004. In addition, effective February
      1, 2005, we were required to make monthly principal payments in the amount
      of
      $151,515 per month, continuing until the maturity date. Under the terms of
      the
      Note, the monthly interest payment and the monthly principal payment are payable
      either in cash at 102% of the respective monthly amortization amount, or, if
      certain criteria are met, in shares of our common stock. The principal criteria
      for the monthly payments to be made in shares of our common stock
      include:





·
            the
                effectiveness of a current registration statement covering the shares
                of
                our common stock into which the principal and interest under the
                note are
                convertible;


·
            an
                average closing price of our common stock for the previous five trading
                days greater than or equal to 110% of the fixed conversion price;
                and


·
            the
                amount of such conversion not exceeding 25% of the aggregate
                dollar-trading volume of our common stock for the previous 22 trading
                days.





Upon
      an
      event of default under the Note, Laurus may demand repayment of the outstanding
      principal balance at a rate of 130% of the Note plus any accrued
      interest.





On
      a
      month-by-month basis, if we register the shares of our common stock issuable
      upon conversion of the Note and upon exercise of the Warrant on a registration
      statement declared effective by the Securities and Exchange Commission, and
      the
      market price of our common stock exceeds the conversion price by at least 25%
      for five consecutive trading days, then the interest rate of the Note for the
      succeeding calendar month shall be reduced by 1% for


every
      25%
      increase in the market price of our common stock above the conversion price
      of
      the Note, but in no event shall the interest rate be less than 6%.





Laurus
      also had the option to convert all or a portion of the Note into shares of
      our
      common stock at any time, subject to limitations described below, at a
      conversion price of $0.57 per share, subject to adjustment as described below.
      At December 312, 2004, the maximum amount of conversion that Laurus could
      convert was 3,898,136 shares of our common stock.


Laurus
      was limited on its ability to convert if the conversion of the Note or the
      exercise of the Warrant would cause the shares then held by Laurus to exceed
      4.99% of our outstanding shares of common stock unless there had been an event
      of default or Laurus provided us with 75 days prior notice.





We
      were
      obligated to file a registration statement with the Securities and Exchange
      Commission registering the resale of shares of our common stock issuable upon
      conversion of the Note and exercise of the Warrant by December 12, 2004, and
      to
      have such Statement declared effective by the SEC not later than February 5,
      2005. We timely filed the registration statement.












On
      February 28, 2005, the Company entered into an “Amendment and Waiver Agreement”
with Laurus in connection with the financing agreement entered into on October
      28, 2004. The amended Agreement provides for payment of accrued interest,
      principal and fees, pursuant to the original note in the form of a warrant
      to
      purchase 1,500,000 shares of the Company’s common stock with an exercise price
      of $0.50 per share.





On
      July
      22, 2005 in order to satisfy a default under the terms of the Laurus note (“the
      first note”), the Company entered into various agreements with Laurus relating
      to, supplementing and amending the prior agreements. Laurus agreed to forbear
      from taking action on existing defaults until October 26, 2007. In consideration
      of Laurus forbearance, the Company issued Laurus a Secured Convertible Term
      Note
      in the principal amount of $1,286,099 (the “Second Note”) representing the
      aggregate accrued interest and fees owed by the Company to Laurus as of July
      31,
      2005. Under the terms of the second note, interest would be paid monthly, in
      arrears, commencing on September 1, 2005 until October 26, 2007, the Maturity
      Date. Principal and any unpaid interest is due on the Maturity Date. The Second
      Note was issued in addition to, and not in replacement or satisfaction of,
      the
      First Note.





On
      November 4, 2005, Laurus notified us via certified mail that certain Forbearance
      Defaults had occurred, and were continuing due to our failure to make payments
      of interest to Laurus on September 1, 2005, October 1, 2005 and November 1,
      2005
      in accordance with the requirements of the July 22, 2005 note, and regularly
      scheduled payments of principal and interest to Laurus on August 1, 2005,
      September 1, 2005, October 1, 2005 and November 1, 2005 under and in accordance
      with the terms of the October, 2004 note. Based upon the occurrence and
      continuance of the defaults, Laurus notified us that all obligations


and
      liabilities owed to Laurus are accelerated. Demand was made in the amount of
      $6,694,875, constituting all obligations and liabilities to Laurus as of
      November 7, 2005. If the payment was not received by Laurus by November 7,
      2005,
      Laurus would exercise its rights and remedies against us under the Note
      documents and applicable law, including without limitation the immediate
      commencement of foreclosure proceedings against our real property covered by
      the
      Deed of Trust.





On
      November 23, 2005, we received a Notice of Trustee’s Sale in which Laurus
      notified us that all real property interests, including all property and
      fixtures described under the Deed of Trust, Assignment of Rents. Security
      Agreement and Fixture Filing executed by us and recorded on July 28, 2005 in
      the
      Official Records of Maricopa County, Arizona would be sold to the highest bidder
      on March 2, 2006 .





On
      May 8,
      2006 in the Superior Court of the State of Arizona in the county of Maricopa,
      Case number CV2006-001476, Laurus Master Fund, Ltd. an order was filed granting
      motion for an entry of order (i) approving the receiver’s final report, (ii)
      discharging the receiver, and (iii) dismissing the case against us. The Court
      found that the Court appointed receiver over all of the real, personal, tangible
      and intangible property of the Company, including all buildings, structures,
      leases, fixtures, and movable personal property had fulfilled all of its duties
      under the Appointment Order, had engaged in the following
      activities:





1.
            Engaged
                in correspondence with Laurus and its various representatives regarding
                the status and security of the receivership
                property;


2.
            Secured
                possession of real and personal property constituting the Receivership
                Property;


3.
            Conducted
                site tours of the real property to ensure the security of Receivership
                Property;


4.
            Monitored
                the limited operations of the Company and its employees to ensure
                the
                security of the Receivership
                Property;


5.
            Verified
                the ownership of certain items of personal property owned by third
                parties
                and monitored removal of those items of personal property from the
                Receivership Property;


6.
            Attended
                (1) hearing on “Application for Order to Show Cause Why a Receiver Should
                Not be Appointed; (2) foreclosure sale; and (3) UCC personal property
                sale.












The
      Court
      found that the Receiver had fully complied with and discharged all of its
      obligations under the Appointment order, and was released from any and all
      claims relating to its roles and duties under the Appointment Order. The Case,
      including all claims and counterclaims, was dismissed with prejudice, with
      each
      side to bear their own fees and costs.





The
      Receiver’s Final Report reporting that on March 2, 2006, all of our real
      property was sold through a foreclosure sale (Real Property Sale). In addition,
      on March 23, 2006 all of our personal property was sold through a UCC sale
      (Personal Property Sale). Following the Real Property Sale and the Personal
      Property Sale, substantially all of our assets had been sold in satisfaction
      of
      Laurus claims.







Long-term
      debt consists of the following:






December
                  31,2006
              2005Long-term
                  convertible debt
              $
                  -
              $
                  6,450,791Current
                  portion
              -
              6,450,791Total
                  Long Term Convertible Debt
              -
              $
                  -Maturities
                  of long-term convertible debt for the
                five
                  succeeding years ending December 31,are
                as
                  follows:2006
              $
                  -
              $
                  6,450,791$
                  -
              $
                  6,450,791





7.
      Commitments and Contingencies





Legal
      proceedings





The
      Company is involved in various unresolved legal actions, administrative
      proceedings and claims in the ordinary course of business. Although it is not
      possible to predict with certainity the outcome of these unresolved actions,
      the
      Company believes these unresolved legal actions will not have a material effect
      on its financial position or results of operation.





Operating
      Leases





We
      have
      lease agreements and arrangements, whereby we lease warehouse and operating
      facilities. For the years ended December 31, 2006 and 2005 our rent expense
      was
      approximately $779,000 and $523,000 respectively.





During
      the year ended December 31, 2005, we became delinquent on building lease
      payments to a non-related party. Under the terms of the lease agreement we
      were
      locked-out, and under the terms of a court order, the lessor enforced their
      lien
      and took possession of our personal property to satisfy the payment of the
      delinquent lease.





License
      Agreements





In
      January, 2003, the Company entered into an agreement with a corporation that
      owns the licensing rights to a consumer product trademark. The agreement
      provides the Company with a three-year exclusive license to produce, market
      and
      sell flavored water bearing the trademark name in the United States and Canada.
      In consideration, the Company agreed to pay a royalty of four percent of invoice
      sales (net of shipping and sales taxes), payable each quarter. The agreement
      calls for a guaranteed minimum annual royalty fee of $40,000 in 2003, $120,000
      in 2004 and $200,000 in 2005. The agreement may be renewed at the option of
      the
      Company provided certain minimum sales have occurred. Royalty expense was $-0-
      and $200,000 for the years ended December 31, 2006 and 2005.





8.
      Impairment Charges on Equipment





As
      a
      result of the foreclosure and subsequent trustee’s sale by Laurus, we have
      recorded an impairment in the carrying value of our property, plant and
      equipment of $_1,662,658 at December 31, 2005.












9.
      Capital Lease Obligations





The
      Company was leasing bottling equipment from a related entity that was recorded
      as a capital lease. The equipment was valued at an appraised amount of
      $1,082,000. At December 31, 2004, the equipment had not been placed into service
      and consequently no amortization was recorded.





The
      original lease period was for five years and the Company was required to pay
      a
      deposit of $151,567, which represented the residual value of the lease. The
      deposit was offset against the lease obligation. The effective weighted interest
      rate of the leases was 14.5%. Monthly payments for the lease were
      $21,889.





At
      December 31, 2005 the balance due on the lease was $785,159, and is included
      in
      current liabilities. The equipment that was included in this capital lease
      was
      included in the foreclosure and subsequent trustee’s sale by
      Laurus.





10.
      Income Taxes





Deferred
      income taxes are determined based on the tax effect of items subject to
      differences in book and taxable income. The Company had no income tax provision
      for the years ended December 31, 2006 and 2005. There is approximately
      $41,074,000 of net operating loss carry-forward, which expires beginning in
      2022. the net deferred tax is as follows:











For
                  the Years Ended December 31,2006
              
              2005Non-current
                  deferred tax assets (liabilities):Net
                  operating loss carry-forward
              
              $
              13,835,000
              
              $
              12,225,000Allowances,
                  reserves and depreciation
              
              
              -0-
              
              
              735,000Valuation
                  allowance
              
              
              (13,835,000
              )
              
              (12,960,000
              )$
              -
              
              $
              -
  A
        reconciliation of the provision for income taxes to the statutory federal
        rate
        (34%) for continuing operations is as follows:
 
 For
                  the Years Ended December 31,2006
              
              2005Statutory
                  tax benefit
              
              $
              (1,680,000
              )
              $
              (5,550,000
              )Non-deductible
                  expense
              
              
              316,000
              
              
              725,000Deductible
                  expenses for tax purposes
              
              
              -
              
              
              (404,000
              )Valuation
                  allowance
              
              
              1,364,000
              
              
              5,871,000$
              -
              
              $
              -










**11** .  Related
      Party Transactions




During
      the year ended December 31, 2006 our Chairman, Chief Executive Officer and
      largest stockholder of the Company has advanced $4,161,003 to the
      Company.




Entities
      controlled by the former wife of the Company's Chairman, Chief Executive Officer
      and largest stockholder provided the following to the Company for the year
      ended
      December 31, 2005 and December 31, 2004, respectively:





Services:




For
                the
              Year
                Ended
              December
                31,
              2006
            For
                the
              Year
                Ended
              December
                31,
              2005Payments
                under operating and capital leases
              Consulting
                services (by common stock issuance)
            
            110,283
              47,520Total
            
            $
                3,768,230









12. Equity
      Transactions




During
      the first quarter 2005:




On
      February 28, 2005, the Company issued Laurus a warrant to purchase 1,500,000
      shares of common stock with a purchase price of $0.50 pursuant to an Amendment
      and Waiver Agreement for the purpose of amending the terms of the previous
      Secured Convertible Term Note, the Securities Purchase Agreement, and the
      Registration Rights Agreement, all dated October 26, 2004. The warrant has
      a
      five year term. The value of the warrants, according to a Black-Sholes
      calculation, was $114,000.




During
      the second quarter 2005




On
      June
      10, 2005, the Company granted a warrant to purchase 1,000,000 shares of common
      stock with a purchase price of $0.20 to a consultant for the Company pursuant
      to
      the Company’s Stock Plan and a Consultant Agreement. The warrant has a five year
      term. The value of the warrants, according to a Black-Sholes calculation, was
      $107,000.












During
      the third quarter 2005





On
      July
      20, 2005, the Company issued 6,750,000 shares of its common stock for services.
      The fair value o these shares at the date of issuance was
      $1,485,000.





On
      August
      16, 2005, the Company issued 1,500,000 shares of its common stock for services.
      The fair value o these shares at the date of issuance was $320,000.





On
      September 9, 2005 the Company issued 16,667 post 1:12 split shares of its common
      stock to an investor in the Company’s predecessor, American Career Centers. The
      investor had purchased 200,000 shares prior to the split on March 12, 2002
      for
      $20,000 but the shares were never issued.





On
      September 13, 2005, the Company issued 300,000 shares of its common stock for
      services. The fair value of these shares at the date of issuance was
      $87,000.





On
      September 16, 2005, the Company issued 950,000 shares of its common stock for
      services. The fair value of these shares at the date of issuance was
      $266,000.





During
      the fourth quarter of 2005, the Company:





Subscribed
      for 40,000 shares of its common stock and received $10,000.





On
      December 31, 2005, the company approved the issuance of its common stock to
      convert a note payable from its’ Chairman/CEO. The fair value of these shares to
      be issued is $1,700,000.








Options
      and Warrants





During
      the first quarter of 2005, we issued warrants to purchase 1,500,000 shares
      of
      common stock to Laurus Master Fund, Ltd. The value of the warrants using the
      Black-Scholes method was $107,000 that was recorded as additional paid-in
      capital.








A
      summary
      of stock options and warrants is as follows:






Options
              Weighted
                  Average Price
              Warrants
              Weighted
                  Average Exercise PriceOutstanding
                  at December 31, 2005
              -
              $
                  -
              13,376,538
              $
                  .52Granted
                  Cancelled Exercised
              -
              -
              -
              .20Outstanding
                  at December 31, 2006
              600,000
              $
                  .77
              13,376,538
              $
                  .48







13.
      Concentrations





During
      2005 we had five major customers that accounted for 51% of gross sales.


























American
            Water Star, Inc. and Its Subsidiaries
 Notes
            to
            the Consolidated Financial Statements
 As
            of
            December 31, 2006


**EXHIBIT
      31**





**CERTIFICATION**





I,
      Roger
      Mohlman, certify that:





1.  I
      have
      reviewed this annual report on Form 10-KSB of American Water Star,
      Inc.;





2.  Based
      on
      my knowledge, this annual report does not contain any untrue statement of a
      material fact or omit to state a material fact necessary to make the statements
      made, in light of the circumstances under which such statements were made,
      not
      misleading with respect to the period covered by this quarterly
      report;





3.  Based
      on
      my knowledge, the financial statements, and other financial information included
      in this quarterly report, fairly present in all material respects the financial
      condition, results of operations and cash flows of the registrant as of, and
      for, the periods presented in this quarterly report;





4.  I
      am
      responsible for establishing and maintaining disclosure controls and procedures
      (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
      and have:





(a)   Designed
      such disclosure controls and procedures, or caused such disclosure controls
      and
      procedures to be designed under our supervision, to ensure that material
      information relating to the small business issuer, including its consolidated
      subsidiaries, is made known to us by others within those entities, particularly
      during the period in which this report is being prepared;





(b)   Evaluated
      the effectiveness of the registrant’s disclosure controls and procedures and
      presented in this report our conclusions about the effectiveness of the
      disclosure controls and procedures, as of the end of the period covered by
      this
      report based on such evaluation; and





(c)   Disclosed
      in this report any change in the registrant’s internal control over financial
      reporting that occurred during the small business issuer's most recent fiscal
      quarter (the small business issuer's fourth fiscal quarter in the case of an
      annual report) that has materially affected, or is reasonably likely to
      materially affect, the small business issuer's internal control over financial
      reporting; and





5.  I
      have
      disclosed, based on my most recent evaluation of internal control over financial
      reporting, to the small business issuer's auditors of the small business
      issuer's board of directors (or persons performing the equivalent
      functions):





(a)  All
      significant deficiencies and material weaknesses in the design or operation
      of
      internal control over financial reporting which are reasonably likely to
      adversely affect the small business issuer's ability to record, process,
      summarize and report financial information; and





(b)  Any
      fraud, whether or not material, that involves management or other employees
      who
      have a significant role in the small business issuer's internal control over
      financial reporting.








Date:  December
      20, 2007






____________________________


Roger
      Mohlman


Chief
      Executive Officer and Principal Accounting Officer








**EXHIBIT
      32**





**CERTIFICATION
      PURSUANT TO**


**18
      U.S.C. SECTION 1350,**


**AS
      ADOPTED PURSUANT TO**


**SECTION
      906 OF THE SARBANES-OXLEY ACT OF 2002**





In
      connection with the Annual Report of American Water Star, Inc. (the “Company”)
      on Form 10-KSB for the year ended December 31, 2005, as filed with the
      Securities and Exchange Commission on the date hereof (the “Report”), I, Roger
      Mohlman, Chief Executive Officer and Principal Accounting Officer of the
      Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002, that:





1.
            The
                Report fully complies with the requirements of Section 13(a) or 15(d)
                of
                the Securities Exchange Act of 1934;
                and





2.
            The
                information contained in the Report fairly presents, in all material
                respects, the financial condition and results of operations of the
                Company.













Roger
      Mohlman, Chief Executive Officer and


Principal
      Accounting Officer


December
      20, 2007