UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C.  20549





FORM 10-K Amended







[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the fiscal year ended December 31, 2009





or





[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934








For the transition period from _______________ to ___________________





Commission file number 001-32220






PRIME STAR GROUP, INC.


(Exact name of registrant as specified in its Charter)





Nevada

87-0636498(State or other jurisdiction of

(I.R.S. Employerincorporation or organization)

Identification No.)





4560 S. Decatur, Suite 301B, Las Vegas, Nevada 89103


(Address of principal executive offices)





Registrant’s telephone number, including area code: (702) 497-0736





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





Securities registered pursuant to Section 12(g) of the Act:





Common Stock, $0.001 par value


(Title of Class)





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





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





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














Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained herein, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-k or any amendment to this Form 10-k. [   ]





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.





Large accelerated filer
[   ]

Accelerated filer
[   ]Non-accelerated filer
[   ]

Smaller reporting company
[X]





Indicate by check mark whether the registrant is a shell company. [   ] Yes    [X] No





The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on April 13, 2010 was approximately $373,076.





The registrant had 50,442,778 shares of common stock and 0 shares of preferred stock outstanding as of March 31, 2010.








EXPLANATORY NOTE





Prime Star Group, Inc. and Subsidiaries is filing this amendment to its Form 10-K for the year ended December 31, 2009 (the “Form 10-K”) for the purpose of filing audited financial statements. This amendment does not reflect events occurring after the filing of the Form 10-K and, except as set forth herein.






























TABLE OF CONTENTS





PagePART IITEM 1
BUSINESS
1ITEM 1A
RISK FACTORS
4ITEM 1B
UNRESOLVED STAFF COMMENTS
5ITEM 2
PROPERTIES
5ITEM 3
LEGAL PROCEEDINGS
5ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
6PART IIITEM 5
MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
6ITEM 6
SELECTED FINANCIAL DATA
8ITEM 7
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
8ITEM 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
14ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
14ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
28ITEM 9A
CONTROLS AND PROCEDURES
28ITEM 9B
OTHER INFORMATION
29PART IIIITEM 10
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
29ITEM 11
EXECUTIVE COMPENSATION
30ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
31ITEM 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
31ITEM 14
PRINCIPAL ACCOUNTING FEES AND SERVICES
31PART IVITEM 15
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
32SIGNATURES
33








PART I.





ITEM 1.  BUSINESS





Business Development





Prime Star Group, Inc. (formerly 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.  On April 11, 2009 American Water Star, Inc. amended its name to Prime Star Group, Inc.




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.




1


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 Prime Star Group.




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 PRIME STAR GROUP, 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, 2009.  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 StatusAll 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





Description of Business





Prime Star Group 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.




2


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




Business Plan





Our Company objective is to market a new flexible pouch packaging in the ready to drink adult beverage market as well as with our popular Geyser flavored waters.  This flexible packaging will also extend into related beverage markets.  PSGI is now prepared to begin operations in its target segment of the adult beverage (liquor and related) industry, and reestablish their customer base with their Geyser flavored waters.





The multi-billion dollar liquor industry has companies with a long history of success and established market share.  PSGI does not intend to compete with those companies or their conventional packaging methods.  The Company will enter this profitable marketplace with a line of exciting new products and with a new and very unique packaging concept.  We will target the high-end market with our own quality line of distilled spirits alone and with the unique and proprietary soft pouch is a key element in PSGI’s corporate strategy, product line and global sales and marketing plan for our mixed drinks.  This packaging style is embodied in one of PSGI’s customers sales slogans, “It’s In The Bag.”





The Industry




Pouch Packaging




According to Freedonia Group’s Projections , the pouch market will be 6.5 billion in the U.S. alone by 2010.  The global market is estimated to be 21.8 billion in 2005.




If anyone had predicted in 1981 that Kraft’s new foil pouch containing all natural Capri SunTM Juice would begin a packaging revolution others would surely have jumped on the pouch bandwagon.




A range of factors will contribute to the huge proliferation of this packaging format. These include; convenience features, market differentiation, shelf-appeal, price-appeal, increase in the number of new products and faster inventory turns.





Marketing and Distribution




The Bartender’s ChoiceTM product line will initially launch with:




-
Classic Margaritas


-
Strawberry Margaritas


-
Mojitos




The drinks will be packaged individually in a 200ml (6.78 oz) flexible pouch with a Bartender’s Best Logo along with the flavor and type of beverage seductively displayed.




The individual servings will then be packaged in 10 serving Party Pack for club stores and super markets and sold individually at convenience stores as well.


3




There are a myriad of bottles and jugs that contain liquor, and mixed drinks. There are bottles of mixes only, liquor only, and mixed drinks.  The manufacturers, shippers, distributors and retailers of these products share a common situation...how to improve profit, expand and retain market share. Bottles, glass or plastic, have physical characteristics that define the amount that can be shipped and displayed in a given space.  The PSGI ‘pouch’, or soft bag, developed and protected by trade secrets is a 200 ml container for individual ready to drink adult beverages. It consists of several layers of clear film, one with the artwork, consumer and branding information.  The pouch comes with a drinking straw that is also used to pierce the pouch (anywhere on the pouch), and drink from it. The film “seals” around the straw so there is no leakage. A single pouch can be consumed just as it comes by the purchaser, served as a ‘perfect mixed drink every time’ NO BARTENDER NEEDEDTM.  It can also be poured into other containers such as the typical drink glass in a club, bar, casino, home or elsewhere for those who do not wish to present or consume the adult beverage from the pouch itself using the provided straw.




Since alcohol does not freeze, but does become very cold, we’ve created a formula that allows the drink to become slushy. The Bartender’s Choice pouch placed in a tub of ice, a store, home or airline freezer becomes a self-contained, individually chilled adult beverage drink waiting to be consumed.  The additional upside of the pouch for the end user is that the product is not spoiled if not used or completely consumed.  The consumer can just place the pouch back in the freezer and use when desired. It does not require typical “shelf-space” to be seen and purchased and, therefore, does not necessarily have to displace the shelf space other mixed drinks or liquor that may be available in bottles or cans nor force Bartender’s ChoiceTM to compete with ‘giants’ in the industry for that very expensive shelf space.   The soft Bartender’s ChoiceTM pouches can be stored and/or displayed in many ways and places, such as in large tubs, with or without ice and other trade secret methods of placement.




A typical Bartender’s BestTM Margarita drink placed in a freezer turned to slush within 45 minutes.  When left out at room temperature, it remained slushy for one hour and 20 minutes and stayed completely cold for an additional 20 minutes. Since no ice is used, the drink does not lose any flavor while the typical margarita does when the ice melts.





Private Label





PSGI will also offer their cost effective and consumer pouch for other manufactured brands in the market that want to take advantage of the trend of adult beverages packaged in pouches.  It is an opportunity for establishments to put their name as the brand on the product. PSGI does not believe that this will pose any type of competitive threats to PSGI’s own brands because it is a controlled environment and we will know their strategies and limited distribution.  More of the same packaging type increases growth in our sector and does nothing but help PSGI.





Competition





As of this date, PSGI has no real direct competition to its packaging of adult spirit based beverage in a pouch.  Due to the efficiency and low cost manufacturing of the pouch, PSGI’s management believes that it will take a minimum of two years to compete with PSGI in terms of quality and price.





Intellectual Property





We manufacture, promote and sell our Bartender’s ChoiceTM under our trademark-protected brand,.  Depending upon the jurisdiction, trademarks are valid as long as they are in use and/or their registrations are properly maintained and they have not been found to have become generic.  Registrations of trademarks can generally be renewed as long as the trademarks are in use.





Employees





As of the date of this Report, has no full-time paid employees.  We retain independent contractors as needed.  None of our employees are represented by labor unions and we believe that our employee relations are satisfactory.





4


ITEM 1A.  RISK FACTORS





We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.





ITEM 1B.  UNRESOLVED STAFF COMMENTS





We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.





ITEM 2.  PROPERTIES





We do not own any real property.  Our principal executive offices are located at 4560 S. Decatur, Suite 301B, Las Vegas, Nevada 89103 where we are leasing approximately 2,000 square feet under an agreement that commenced in January 1 2010 and expires in December, 2010.  We also have support staff located at 650 Oakmont, Suite 2110, Las Vegas NV 89109.





ITEM 3.  LEGAL PROCEEDINGS





On November 4, 2005, Laurus 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.





On April 4, 2004 Michiana Dairy Processors, LLC filed a complaint against Star Beverages, Inc. (sic) in circuit court in Lake County Indiana, cause number 45C01-0404-PL-00085 which was subsequently amended to included American Water Star, Inc. (now Prime Star Group, Inc.) and its subsidiary entities, All Star Beverages, Inc., All Star Beverages of Arizona, Inc., Geyser Beverages, Inc., Hawaian Tropicals, Inc., on March 3, 2009 this case was removed to the Federal Court of Northern Indiana, Hammond Division and is in the discovery phase, awaiting trial in November 2010.  PSGI intends to defend itself against this frivolous lawsuit.  PSGI believes Michiana Dairy, LLC perpetrated a fraud by not having the authority to enter into a contract, since it was not permitted to bottle water or other beverage products in the State of Indiana.





5


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





We did not have to submit any matters to a vote of our security holders during the fourth quarter of the fiscal year 2009.





PART II.





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





Market Information





Our common stock is currently quoted under the symbol “PSGI” on the PinkSheets quotation system as of May 2010. 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


LOW2009First Quarter

$
0.75


$
0.005Second Quarter

$
0.30


$
0.10Third Quarter

$
0.19


$
0.03Fourth Quarter

$
0.30


$
0.29





PERIOD

HIGH


LOW2008First Quarter

$
6.00


$
0.01Second Quarter

$
1.00


$
0.01Third Quarter

$
1.00


$
0.06





Holders of Common Stock




As of December 31, 2009, we had approximately 1448 stockholders of record of the 44,585,529shares of common stock outstanding.




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.




6


Equity Compensation Plan Information




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.





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 Issues




We signed a lease in January 2010 for the office address of 4560 S. Decatur, Suite 301B, Las Vegas, Nevada 89103.







7




ITEM 6.  SELECTED FINANCIAL DATA





We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.





ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION








Forward Looking Statements





Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).  Forward-looking statements are, by their very nature, uncertain and risky.  These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.





Although the forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them.  Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements.  You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.





Summary of Business





Prime Star Group, Inc. (fka 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.





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.




8


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.




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.




SUBSEQUENT EVENTS




We are no longer listed on the Over the Counter Bulletin Board (OTCBB) because of our late filing of our Form 10-K, as of May 2010.  We are currently listed on the PinkSheets at PSGI.PS.  The company is determined to make every effort to maintain all of its filings in a timely manner.




Critical Accounting Policies





Our financial statements are prepared in accordance with accounting principles generally accepted in the United States., which require us to make estimates and assumptions in certain circumstances that affect amounts reported.  In preparing these financial statements, management has made its best estimates and judgments of certain amounts, giving due consideration to materiality.  We believe that of our significant accounting policies (more fully described in notes to the financial statements), the following are particularly important to the portrayal of our results of operations and financial position and may require the application of a higher level of judgment by our management, and as a result are subject to an inherent degree of uncertainty.





9


Estimates





Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  By their nature, these estimates and judgments are subject to an inherent degree of uncertainty.  We review our estimates on an on-going basis, including those related to sales allowances, the allowance for doubtful accounts, inventories and related reserves, long-lived assets, income taxes, litigation and stock-based compensation.  We base our estimates on our historical experience, knowledge of current conditions and our beliefs of what could occur in the future considering available information.  Actual results may differ from these estimates, and material effects on our operating results and financial position may result.  We believe the following critical accounting policies involve our more significant judgments and estimates used in the preparation of our financial statements.





Revenue Recognition





Revenue is recognized when products are delivered to the customer which occurs when goods are shipped and title and risk of loss transfer to the customer, in accordance with the terms specified in the arrangement with the customer.  Revenue recognition is deferred in all instances where the earnings process is incomplete based on the criteria listed above.  As of December 31, 2009 and 2008, we did not have any revenues that were required to be deferred.  Management provides for sales returns and allowances in the same period as the related revenues are recognized.  Management bases their estimates on historical experience or the specific identification of an event necessitating a reserve.





In accordance with Emerging Issue Task Force (“EITF”) No. 01-9, “Accounting for Consideration Given by a Vendor to a Customer,” slotting fees, buy downs, cooperative advertising and other reductions and incentives given by us to our customers are included as a reduction of revenue, rather than as a cost of goods sold.





Slotting fees paid to a customer are generally amortized over the life of the slotting agreement which is typically one year and included as reduction of revenues.





Stock-Based Compensation





We account for stock-based compensation in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment.”  SFAS 123R requires that we account for all stock-based compensation transactions using a fair-value method and recognize the fair value of each award as an expense, generally over the service period.  The fair value of stock options is based upon the market price of our common stock at the grant date.  We estimate the fair value of stock option awards, as of the grant date, using the Black-Scholes option-pricing model.  The use of the Black-Scholes model requires that we make a number of estimates, including the expected option term, the expected volatility in the price of our common stock, the risk-free rate of interest and the dividend yield on our common stock.  If our expected option term and stock-price volatility assumptions were different, the resulting determination of the fair value of stock option awards could be materially different and our results of operations could be materially impacted.





10


Accounting for Non-Employee Stock-Based Compensation





We measure compensation expense for non-employee stock-based compensation in accordance with EITF No. 96-18, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.”  The fair value of the option issued or expected to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received.  The fair value is measured at the value of our common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete.  In the case of the issuance of stock options, we determine the fair value using the Black-Scholes option pricing model.  The fair value of the equity instrument is charged directly to stock-based compensation expense and credited to additional paid-in capital.





Modifications to Convertible Debt





We account for modifications of embedded conversion features (“ECF”) in accordance with EITF 06-6 “Debtors Accounting for a Modification (or exchange) of Convertible Debt Instruments.”  EITF 06-6 requires the modification of a convertible debt instrument that changes the fair value of an ECF be recorded as a debt discount and amortized to interest expense over the remaining life of the debt.  If modification is considered a substantial (i.e., greater than 10% of the carrying value of the debt), an extinguishment of the debt is deemed to have occurred, resulting in the recognition of an extinguishment gain or loss.





Derivative Financial Instruments





Derivative financial instruments, as defined in SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” consist of financial instruments or other contracts that contain a notional amount and one or more underlying (e.g., interest rate, security price or other variable), that require no initial net investment and permit net settlement.  Derivative financial instruments may be free-standing or embedded in other financial instruments.  Further, derivative financial instruments are initially, and subsequently, measured at fair value and recorded as liabilities or, in rare instances, assets.





We do not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks.  However, we have convertible debt with features that are either (i) not afforded equity classification, (ii) embody risks not clearly and closely related to host contracts, or (iii) may be net-cash settled by the counterparty.  As required by SFAS 133, in certain instances, these instruments are required to be carried as derivative liabilities, at fair value, in its financial statements.





We estimate the fair values of our derivative financial instruments using the Black-Scholes option valuation model because it embodies all of the requisite assumptions (including trading volatility, estimated terms and risk free rates) necessary to fair value these instruments.  Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors.  In addition, option-based techniques are highly volatile and sensitive to changes in the trading market price of our common stock, which has a high-historical volatility.  Since derivative financial instruments are initially and subsequently carried at fair values, our operating results will reflect the volatility in these estimate and assumption changes.








11


Equity Instruments Issued with Registration Rights Agreement





We account for these penalties as contingent liabilities, applying the accounting guidance of SFAS No. 5, “Accounting for Contingencies” as required by FASB Staff Positions FSP EITF 00-19-2 “Accounting for Registration Payment Arrangements,” which was issued December 21, 2006.  Accordingly, we recognize the damages when it becomes probable that they will be incurred and amounts are reasonably estimable.





Recent Accounting Pronouncements





On July 1, 2009, the Company adopted Accounting Standards Update (“ASU”) No. 2009-01, “Topic 105 - Generally Accepted Accounting Principles - amendments based on Statement of Financial Accounting Standards No. 168, “The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles” (“ASU No. 2009-01”).  ASU No. 2009-01 re-defines authoritative GAAP for nongovernmental entities to be only comprised of the FASB Accounting Standards CodificationTM (“Codification”) and, for SEC registrants, guidance issued by the SEC.  The Codification is a reorganization and compilation of all then-existing authoritative GAAP for nongovernmental entities, except for guidance issued by the SEC.  The Codification is amended to effect non-SEC changes to authoritative GAAP.  Adoption of ASU No. 2009-01 only changed the referencing convention of GAAP in Notes to the Consolidated Financial Statements.




In October 2009, the FASB issued an Accounting Standards Update ("ASU") regarding accounting for own-share lending arrangements in contemplation of convertible debt issuance or other financing.  This ASU requires that at the date of issuance of the shares in a share-lending arrangement entered into in contemplation of a convertible debt offering or other financing, the shares issued shall be measured at fair value and be recognized as an issuance cost, with an offset to additional paid-in capital. Further, loaned shares are excluded from basic and diluted earnings per share unless default of the share-lending arrangement occurs, at which time the loaned shares would be included in the basic and diluted earnings-per-share calculation.  This ASU is effective for fiscal years beginning on or after December 15, 2009, and interim periods within those fiscal years for arrangements outstanding as of the beginning of those fiscal years. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.




On December 15, 2009, the FASB issued ASU No. 2010-06 Fair Value Measurements and Disclosures Topic 820 “Improving Disclosures about Fair Value Measurements”.  This ASU requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in Codification Subtopic 820-10. The FASB’s objective is to improve these disclosures and, thus, increase the transparency in financial reporting.  The adoption of this ASU will not have a material impact on the Company’s consolidated financial statements.










12


Results of Operations for the Fiscal Year Ended December 31, 2009 and 2008





Sales





For the year ended December 31, 2009 we had revenues no revenues.  We had no revenues for the year ended December 31, 2008.   For the year ended December 31, 2009 our general and administrative expenses totaled $2,694,337 an increase of $2,076,511 from the $617,826 for the year ended December 31, 2008.





Liquidity and Capital Resources





As of December 31, 2009, the company had $17,060.00 cash and a net operating loss of $2,769,320 compared to no cash and net operating loss of 617,826 as of December 31, 2008.





Cash used in operating activities totaled a deficit of $104,678 for the year-ended December 31, 2009.





There were an acquisition of intangible assets worth 10,057 for a negative investing activity as of December 31, 2009.  There was no investment activity as of December 31, 2008. Although the company has a deficit in working capital it believes that it will be able to raise funds for its operations or find a company to acquire with its stock or with which to merge.





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.





Selling and Marketing Expenses





We did not have any selling and marketing expenses in 2009 or 2008.





General and Administrative Expenses





General and administrative expenses include personnel costs for management, operations and finance functions, along with legal and accounting costs, bad debt expense, insurance and non-cash, stock-based compensation.





General and administrative expenses increased from $617,826 to $2,769,320, because of issuance of shares for legal expenses, consulting fees and investor relations.





Cash Flows





The following table sets forth our cash flows for the year ended December 31:





2009


2008


ChangeNet loss

$
(2,769,320
)

$
(617,826
)

$
2,151,511Adjustments to reconcile net

Loss to net cash used in

Operating activities


3,577,470



22,500



3,554,970Accounts Payable Settlements


(722,120
)


-



(722,120Change

$
(86,030
)

$
(595,326
)

$
509,196





13


Operating Activities





Operating cash flows for the 2009 period reflects our net cash used in operating activites of $104,678.





Operating cash flows during 2008 reflect our net loss of $617,826.





Investing Activities





We had  investing activities in  2009 of a loss of 10,057.  We had no investing activities in 2008.





Financing Activities





We had financing activities in 2009 of 131,795 advances from related parties.  We had no financing activities in 2008.





Off Balance Sheet Arrangements





We have no off balance sheet arrangements.





ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK








We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.





ITEM 8.  FINANCIAL STATEMENTS







Page No.Audited Financial Statements for PSGIReport of Independent Registered Public Accounting Firm
15Balance Sheets as of December 31, 2009 and 2008
16Statements of Operations for the Years Ended December 31, 2009 and 2008
17Statements of Shareholders’ Equity for the Years Ended December 31, 2009 and 2008
18Statements of Cash Flows for the Years Ended December 31, 2009 and 2008
19Notes to Financial Statements
20

















14




Report of Independent Registered Public Accounting Firm






To The Board of Directors and Stockholders of Prime Star Group, Inc.




We have audited the accompanying consolidated balance sheets of Prime Star Group, Inc. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in stockholders' deficit and cash flows from operations for each of the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.




We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of the Company's internal control over its financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.




In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Prime Star Group, Inc. as of December 31, 2009 and 2008, and the results of its consolidated operations and cash flows from operations for each of 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 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.




/s/





Gruber & Company, LLC


Lake Saint Louis, Missouri







June 6, 2010




15





Prime Star Group, Inc.

Consolidated Balance SheetsDecember 31,


December 31,2009


2008AssetsCurrent assets:Cash

$
17,060


$
-Inventory


305,750



339,722Prepaid expenses


160,800



-Total current assets


483,610



339,722Equipment


755,897



1,133,846Intangible assets


10,057



-Total assets

$
1,249,564


$
1,473,568Liabilities and Stockholders' DeficitCurrent liabilities:Accounts payable


3,507,445



4,229,565Accrued liabilities


45,000



45,000Accrued compensation - chairman and majority stockholder


916,015



856,015Advances from related parties


3,950,617



3,818,822Total current liabilities


8,419,077



8,949,402Stockholders' deficitPreferred stock, $0.0001 par value, 25,000,000 shares


-



-authorized, no shares issued.Series A preferred convertible, 4,100,0000 shares


-



-authorized, no shares issuedCommon stock, $0.0001 par value, 125,000,000 sharesauthorized, 44,585,559 and 1,368,529 shares issuedand outstanding as of 12/31/09and 12/31/08


4,457



137Stock bought or for services not issued 720,000 and 720,000shares at 12/31/09 and 12/31/08


72



72Common stock subscribed


10,000



10,000Additional paid-in capital


42,336,517



39,265,196Accumulated (deficit)


(49,520,559
)


(46,751,239
)Total stockholders' deficit


(7,169,513
)


(7,475,834
)Total liabilities and stockholders' deficit

$
1,249,564


$
1,473,568








See accompanying Notes to Financial Statements.


16





Prime Star Group, Inc.

Consolidated Statements of OperationsFor the Years EndedDecember 31,2009


2008Sales

$
-


$
-Expenses:General and administrative expenses


2,634,337



377,826General and administrative expenses - related party


60,000



240,000Research and development


74,983



-Total cost and expenses


2,769,320



617,826Net loss


(2,769,320
)


(617,826
)Loss per share

$
(0.11
)

$
(0.45
)Weighted average number ofcommon shares outstanding - basic


25,585,432



1,368,529

















See accompanying Notes to Financial Statements.





17


Prime Star Group, Inc.

Consolidated Statements of Changes in Stockholders' DeficitStockAdditional


Earned


Common





TotalCommon Stock


Paid-in


for Services


Stock


Accumulated


Stockholders'Shares


Amount


Capital


Not Issued


Subscribed


(Deficit)


DeficitBalance, December 31, 2007


1,368,529


$
137


$
37,769,128


$
72


$
10,000


$
(46,133,413
)

$
(8,354,076
)Capital contribution:Property and equipment


-



-



1,133,846



-



-



-



1,133,846Inventory


-



-



339,722



-



-



-



339,722Paid for professional services


-



-



22,500



-



-



-



22,500Net loss for the yearended December 31, 2008


-



-



-



-



-



(617,826
)


(617,826
)Balance, December 31, 2008


1,368,529


$
137


$
39,265,196


$
72


$
10,000


$
(46,751,239
)

$
(7,475,834
)Common stock issued forservices and investor relations


43,220,030



4,320



3,071,321



-



-



-



3,075,641Net loss for the yearended December 31, 2009


-



-



--



-



-



(2,769,320
)


(2,769,320
)Balance, December 31, 2009


44,588,559


$
4,457


$
42,336,517


$
72


$
10,000


$
(49,520,559
)

$
(7,169,513
)








See accompanying Notes to Financial Statements.





18


Prime Star Group, Inc.

Consolidated Statements of Cash FlowsFor the year endedDecember 31,2009


2008Cash flows from operating activities:Net loss from discontinued operations

$
(2,769,320
)

$
(617,826
)Adjustments to reconcile net loss to net cash usedin operating activitiesCommon stock issued for services expense


1,715,349



--Common stock issued for investor relations expense


1,199,492



--Impairment of inventory


33,972



--Impairment of equipment


377,949



22,500Accounts payable settlements


(722,120
)


--Changes in operating assets and liabilitiesAccounts payable and accrued expenses


60,000



595,326Net cash used in operating activities


(104,678
)


--Cash flows used for investing activitiesAcquisition of intangible assets


(10,057
)


--Net cash used for investing activities


(10,057
)


--Cash flows from financing activitiesAdvances from related parties


131,795



--Net cash provided from financing activities


131,795



--Net increase (decrease) in cash


17,060



--Cash - beginning


--



--Cash - ending

$
17,060


$
--Supplemental disclosures:Interest paid

$
--


$
--Income taxes paid

$
--


$
--Supplemental schedule of noncash investing and financing activities:Equipment contributed as additional capital contributions

$
--


$
1,133,846Inventory contributed as additional capital contributions


--



339,722Common stock issued for prepaid expenses


160,800



--








See accompanying Notes to Financial Statements.





19


Prime Star Group, Inc. and Its Subsidiaries


Notes to the Consolidated Financial Statements


As of December 31, 2009








1.  Significant Accounting Policies




Nature of Business




The Company was originally organized on June 1, 1999 as American Career Centers, Inc.  On April 2, 2002 we amended our Articles of Incorporation to change our name to American Water Star, Inc.  On April 11, 2008, the Company filed a Certificate of Amendment to Articles of Incorporation with the Nevada Secretary of State.  The Amendment changed the Company’s name to Prime Star Group, Inc.; reverse split the shares of the Company on a 1 for 100 basis, reauthorized the par value to $.0001 per share and increased the number of authorized shares to 125,000,000 common and 25,000,000 preferred shares.




Basis of Presentation




The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud.  The Company’s system of internal accounting control is designed to assure, among other items, that (1) recorded transactions are valid; (2) valid transactions are recorded; and (3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.




Principles of Consolidation




The accompanying consolidated financial statements include the accounts of Prime Star Group, Inc. a Nevada corporation and its wholly owned subsidiaries and are prepared in accordance with accounting principles generally accepted in the United States.  All significant inter-company accounts and transactions have been eliminated.




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 Financial Accounting Standards Board (“FASB”)  Accounting Standards Codification (“ASC”) Topic 260 (formerly Statement of Financial Accounting Standards No. 128 (SFAS #128) “Earnings Per Share”).  Basic 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.   All earnings per share data has been recomputed based on the 1 for 100 split on April 11, 2008.




20


Cash and Equivalents




We classify time deposits and other investments that are highly liquid and have maturities of three months or less at the date of purchase as cash equivalents




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 primarily of packaging supplies, 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.




During the year ended December 31, 2008 the Company’s Chief Executive Officer and major shareholder contributed packaging inventory with a cost of $339,722.  The Company determined that the original cost approximated fair market value upon the date of contribution.




During the year ended December 31, 2009, the Company’s management determined that the packaging inventory had been impaired in the amount of $33,972.  Accordingly, the Company recorded an inventory impairment expense and reduced the carrying value of the packaging inventory by $33,972.




Goodwill, Trademarks and Other Intangible Assets




We classify intangible assets into three categories: (1) intangible assets with definite lives subject to amortization, (2) intangible assets with indefinite lives not subject to amortization and (3) goodwill. We determine the useful lives of our identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors we consider when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, the Company's long-term strategy for using the asset, any laws or other local regulations which could impact the useful life of the asset, and other economic factors, including competition and specific market conditions. Intangible assets that are deemed to have definite lives are amortized, primarily on a straight-line basis, over their useful lives.




When facts and circumstances indicate that the carrying value of definite-lived intangible assets may not be recoverable, management assesses the recoverability of the carrying value by preparing estimates of sales volume and the resulting gross profit and cash flows. These estimated future cash flows are consistent with those we use in our internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, we recognize an impairment loss. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value. We use a variety of methodologies to determine the fair value of these assets, including discounted cash flow models, which are consistent with the assumptions we believe hypothetical marketplace participants would use.




We test intangible assets determined to have indefinite useful lives, including trademarks, and goodwill, for impairment annually, or more frequently if events or circumstances indicate that assets might be impaired. We use a variety of methodologies in conducting impairment assessments of indefinite-lived intangible assets, including, but not limited to, discounted cash flow models, which are based on the assumptions we believe hypothetical marketplace participants would use. For indefinite-lived intangible assets, other than goodwill, if the carrying amount exceeds the fair value, an impairment charge is recognized in an amount equal to that excess.




21




Research and Development




Research and development costs are charged to operations as incurred and consists primarily of consulting fees, design, and test productions of food and beverages. The Company incurred expenses of $74,983 and $-0- during 2009 and 2008, respectively.




Stock Based Compensation




The Company has adopted ASC Topic 718, “Share-Based Payment” (previously “SFAS 123(R)”).  This topic requires that companies account for awards of equity instruments issued to employees under the fair value method of accounting and recognize such amounts in their statement of operations.  Under this topic, we are required to measure compensation cost for all stock-based awards at fair value on the date of grant and recognize compensation expense in our consolidated statements of operations over the service period that the awards are expected to vest.




The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provision of ASC Topic 718, “Share-Based Payment”, previously “SFAS 123(R)”.  Under this topic, common stock issued to non-employees in exchange for services is accounted for based on the fair value of the services rendered.




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.




Income Taxes




The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes.” ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.




Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s consolidated financial statements.




In July 2006, the FASB issued accounting guidance that clarified the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. This guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Our Company adopted the provisions of this accounting guidance and changed our accounting policy effective January 1, 2007.   The adoption did not have an effect on our financial statements.




Fair Value of Financial Instruments




For certain of the Company’s financial instruments, including, accounts payable and accrued expenses the carrying amounts approximate their fair values due to their short maturities.




22


ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures.  The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:




·
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.


·
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.


·
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.







The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.




The Company has determined that it has no assets and liabilities measured at fair value on a recurring basis at December 31, 2009 and 2008.




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:




Bottling equipment
7 -10





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.




During the year ended December 31, 2008, the Company’s Chief Executive Officer and major shareholder contributed bottling equipment with a cost of $1,133,846.  The Company determined that the original cost approximated fair market value upon the date of contribution.  The bottling equipment was not placed into service as of December 31, 2008, therefore no depreciation was provided for the year ended December 31, 2008.




During the year ended December 31, 2009, the Company’s management determined that the bottling equipment had been impaired in the amount of $377,949.  Accordingly, the Company recorded an equipment impairment expense and reduced the carrying value of the bottling equipment by $377,949.




Derivative Financial Instruments




We account for derivative financial instruments in accordance with ASC Topic 815 (formerly 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.




23


Advertising Costs




The Company expenses all costs of advertising as incurred.  There were $-0- and $-0- advertising costs included in general and administrative expenses as of December 31, 2009 and 2008.




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, 0ur price to the buyer is fixed and determinable, and collectability 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




The Company applies the provisions of ASC Topic 360, “Property, Plant, and Equipment,” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review, the Company believes that as of December 31, 2009 the Company’s long-lived assets had been impaired in the amount of $377,949.




Recently Issued Accounting Standards




On July 1, 2009, the Company adopted Accounting Standards Update (“ASU”) No. 2009-01, “Topic 105 - Generally Accepted Accounting Principles - amendments based on Statement of Financial Accounting Standards No. 168, “The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles” (“ASU No. 2009-01”).  ASU No. 2009-01 re-defines authoritative GAAP for nongovernmental entities to be only comprised of the FASB Accounting Standards CodificationTM (“Codification”) and, for SEC registrants, guidance issued by the SEC.  The Codification is a reorganization and compilation of all then-existing authoritative GAAP for nongovernmental entities, except for guidance issued by the SEC.  The Codification is amended to effect non-SEC changes to authoritative GAAP.  Adoption of ASU No. 2009-01 only changed the referencing convention of GAAP in Notes to the Consolidated Financial Statements.




In October 2009, the FASB issued an Accounting Standards Update ("ASU") regarding accounting for own-share lending arrangements in contemplation of convertible debt issuance or other financing.  This ASU requires that at the date of issuance of the shares in a share-lending arrangement entered into in contemplation of a convertible debt offering or other financing, the shares issued shall be measured at fair value and be recognized as an issuance




cost, with an offset to additional paid-in capital. Further, loaned shares are excluded from basic and diluted earnings per share unless default of the share-lending arrangement occurs, at which time the loaned shares would be included in the basic and diluted earnings-per-share calculation.  This ASU is effective for fiscal years beginning on or after December 15, 2009, and interim periods within those fiscal years for arrangements outstanding as of the beginning of those fiscal years. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.




24


On December 15, 2009, the FASB issued ASU No. 2010-06 Fair Value Measurements and Disclosures Topic 820 “Improving Disclosures about Fair Value Measurements”.  This ASU requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in Codification Subtopic 820-10. The FASB’s objective is to improve these disclosures and, thus, increase the transparency in financial reporting.  The adoption of this ASU will not have a material impact on the Company’s consolidated 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, 2009 and 2008, the Company incurred losses from operations of $2,769,320 and $617,826, respectively.  In addition, the Company has a deficit in working capital, and a deficit of retained earnings, and a negative stockholders’ equity.   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.




3.  Goodwill, Trademarks and Other Intangible Assets




The following table summarizes information related to indefinite-lived intangible assets:




December 31,

2009


2008Trademarks

$
10,057


$
-




Total amortization expense for intangible assets subject to amortization was  $-0- and $-0- for the years ended December 31, 2009  and 2008, respectively. Based on the carrying value of amortized intangible assets as of December 31, 2009, we estimate our amortization expense for the next five years will be as follows:




Amortization

Expense2010

$
2,0112011


2,0112012


2,0112013


2,0112014


2,013







25


4.  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 notes payable totaling $1,700,000 into shares of the Company’s common stock, thus reducing the Company’s liabilities by $1,700,000.  The conversion was done on January 6, 2006 at $.05 per share based on the reported market price of the Company’s common shares on that date.




Accrued compensation totaled $916,015 and $ 856,015 at December 31, 2009 and 2008.




5.  Commitments and Contingencies




Legal proceedings




The Company has been defending a breach of contract civil action filed in 2004 in Indiana.  The primary allegation involves a packing agreement allegedly entered into between the Company’s Subsidiary and Michiana Dairy Processors, LLC  of Gary, Indiana.  The Company denies the existence of any such contract and that Michiana never obtained the required permits, licenses and /or insurance which were prerequisite to any such contract.  In 2009, the action was removed to the US District Court, Northern District of Indiana.  Michiana Processors, LLC  vs. All Star Beverages, Inc. et al, USDC (IN ND) Case no. 2:209-cv-00039 by defendants.  Trial is set for November 2010, however, the Company is extremely confident plaintiff’s case will be summarily dismissed on motions.  PSGI has filed cross-complaints against Michiana for intentioanal interference with the Company, including punitive damages, as well as recovery of all attorney’s fees and costs incurred.




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




Operating Leases




We had lease agreements and arrangements, whereby we lease warehouse and operating facilities.  Each lease expired on or before January 1, 2008.  For the years ended December 31, 2009 and 2008 our rent expenses  were $-0-  and $-0-.




6.  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, 2008 and 2009.  There is approximately $50,000,000 of net operating loss carry-forward, which expires beginning in 2022.  The net deferred tax is as follows:




For the Years Ended December 31,2009


2008Non-current deferred tax assets (liabilities):

Net operating loss carry-forward

$
16,000,000


$
14,500,000Valuation allowance


(16,000,000
)


(14,500,000
)$
---


$
---




26


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 31,2009


2008Statutory tax benefit

$
(1,160,350
)

$
(258,400
)Non-deductible expense


--



--Valuation allowance


1,160,350



258,400$
----------


$
----------





7.  Related Party Transactions




During the year ended December 31, 2008 our Chairman, Chief Executive Officer and largest stockholder of the Company has advanced $3,818,822 to the Company and is due accrued compensation in the amount of $916,015.   During the year ended December 31, 2009, our Chairman, Chief Executive Officer and largest stockholder has advanced $3,950,617.




8.  Equity Transactions




During the first quarter of 2009




The Company issued 968,400 shares of its common stock for consulting services with a fair value on the date of issuance of $48,420 and 13,796,200 shares for investor relations with a fair value on the date of issuance of $689,810.




During the second quarter of 2009




The Company issued 968,290 shares of its common stock for legal services with a fair value on the date of issuance of $96,829; 2,469,940 shares of its common stock for investor relation services with a fair value on the date of issuance of $246,994 and 10,000,000 shares of its common stock for consulting services with a fair value on the date of issuance of $1,000,000.




During the third quarter of 2009




The Company issued 2,600,000 shares of its common stock for consulting services with a fair value of on the date of issuance of $203,600.




During the fourth quarter of 2009




The Company issued 1,340,000 shares of its common stock for legal services that are prepaid at December 31, 2009 with a fair value of $160,800; 4,510,000 shares of its common stock for consulting services with a fair value on the date of issuance of $366,000, and 6,567,200 shares of its common stock for investor relations with a fair value on the date of issuance of $262,688.









27





ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE





We had no changes in or disagreements with accountants on accounting and financial disclosure.





ITEM 9A.  CONTROLS AND PROCEDURES





Evaluation of Disclosure Controls and Procedures





Our President and Chief Financial Officer (the "Certifying Officer") has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of the end of period covered by this report. Based upon such evaluation, the Certifying Officer concluded that our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and is accumulated and communicated to our management, including the Certifying Officer, as appropriate to allow timely decisions regarding required disclosure, due to the material weaknesses described below.





Management's Report on Internal Control over Financial Reporting





Our management, including the Certifying Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipt and expenditures are being made only in accordance with authorizations of management and our Board of Directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.





All internal control systems, no matter how well designed, have inherent limitations. A system of internal control may become inadequate over time because of changes in conditions or deterioration in the degree of compliance with the policies or procedures. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.





Our management assessed the effectiveness of our internal control over financial reporting as December 31, 2009 using the criteria set forth by the Commission of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this assessment, our management concluded that, as of December 31, 2009, our internal control over financial reporting disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and is accumulated and communicated to our management, including the Certifying Officer, as appropriate to allow timely decisions regarding required disclosure, due to the material weaknesses described below.





In light of the material weaknesses described below, our management, including the Certifying Officer, performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the 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.


28


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





1. We have not documented our internal controls. We were required to provide written documentation of key internal controls and assess the effectiveness of our internal controls over financial reporting beginning with our fiscal year ending December 31, 2008. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.





2. We did not have adequate internal controls with respect to recording and reconciling salary accruals and advances to/from related parties. It was determined that certain advances were not properly recorded. Management will implement a process to record and reconcile such amounts in connection with the preparation of its financial statements.





To address these material weaknesses, our management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. Accordingly, we believe that the 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.





Remediation of Material Weaknesses





To remediate the material weaknesses in our documentation, evaluation and testing of internal controls, we plan to engage a third-party firm to assist us in remedying these material weaknesses.





To further remediate the material weaknesses, we now require written documentation for all related-party transactions and a review by all personnel responsible for financial reporting, prior to filing our periodic reports under the Securities Exchange Act of 1934.





ITEM 9B.  OTHER INFORMATION





There is no other information at this time.








PART III.





ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE





Name

Age

Position(s) and Office(s)Roger Mohlman

62

Chief Executive Officer, Chief Financial Officer, Secretary, DirectorJerry Ludeman

65

Secretary





Roger Mohlman: Mr. Mohlman joined the company in April 2002 and brings over 30 years of successful experience in licensing products and business development. During the past 27 years, Mr. Mohlman has held "Who's Who" recognition for his expertise in securing licenses in the apparel and novel industries, including the NFL, NBA and NHL. He has a wealth of experience in restructuring many high growth businesses and in servicing mass-merchandising accounts. He brings vision, experience, talent, contacts and drive that will contribute


significantly to the company's future success.





29


Jerry Ludeman.   Mr. Ludeman is a seasoned executive with over 30 years experience in leading companies within the food and beverage industry. He has managed public and private companies nationally and internationally as CEO, President and Vice President positions and has served as officer, director, Executive Vice President of Sales & Marketing at corporations with revenues of between $1 million and $1 billion.  For eleven years, Mr. Ludeman served as Vice President of Sales & Marketing and Vice President of Food Service for Pet Foods. Mr. Ludeman held the title of President for Barrington Food Group, and Nexterra Marketing, companies that specialized in sales, marketing, product development and manufacturing, in addition to fund raising, organization restructuring and strategic consulting. Mr. Ludeman began his career as VP of  International Sales and Marketing with Lubri-Tech Products Div., Phillips Petroleum Company. Mr. Ludeman traveled the world and was instrumental in developing many new product innovations such as touch up paints for the motorcycle industry. Mr. Ludeman attended college at the University of Wisconsin.





Compliance with Section 16(a)of the Exchange Act





Section 16(a) of the Securities Exchange Act of 1934 requires our directors, fficers and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities. Officers, directors and greater than 10% shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To the best of our knowledge, since December 31, 2007, no delinquencies occurred.





Code of Ethics





We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, and principal accounting officer. Our Code of Ethics was an exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2002 and filed with the SEC on April 16, 2003.





ITEM 11.  EXECUTIVE COMPENSATION





Summary Compensation Table





Set forth below is a summary of compensation for our principal executive officer and our two most highly compensated officers other than our principal executive officer (collectively, the "named executive officers") for our last two fiscal years. There have been no annuity, pension or retirement benefits ever paid to our officers, directors or employees.





With the exception of reimbursement of expenses incurred by our named executive officers during the scope of their employment and unless expressly stated otherwise in a footnote below, none of the named executive officers received other compensation, perquisites and/or personal benefits in excess of $10,000.





Name and

Principal

Position

Year

Salary ($)

Bonus

($)

Stock

Awards

($)

Option

Awards

($)

Non-equity

Incentive Plan

Compensation

($)

All Other

Compensation

($)

Total ($)Roger H. Mohlman, CEO1

2008

$
deferred

$
-0-

$
-0-

$
-0-

$
-0-

$
-0-

$
deferred





(1)  Mr. Mohlman has served as Chief Executive Officer, President, and directo 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 deferred for American Water Star's 2009 and 2008  fiscal years.








30


Employment Agreements





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. No compensation has been awarded to Mr. Mohlman for 2008 and 2009.





Director Compensation





In general, our directors are not compensated for their services, but are entitled for reimbursement of expenses incurred in attending board of directors meetings.





Grants of Plan Based Awards





There were no grants of plan-based awards during our last fiscal year





ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS





None.





ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE





None.





ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES





Gruber & Company, LLC (the "Independent Auditors") were our independent auditors and examined our financial statements for the years ended December 31, 2009 and 2008, respectively. The Independent Auditors performed the services listed below and were as paid the aggregate fees listed below for the years


ended December 31, 2008 and 2009.





Audit Fees





The Independent Auditors were paid aggregate fees of approximately $25,000 for the fiscal year ended December 31, 2009 and approximately $25,000 for the fiscal year ended December 31, 2008 for professional services rendered for the audit of our annual financial statements and for the reviews of the financial statements


included in our quarterly reports on Form 10-QSB during these periods.





Audit Related Fees





The Independent Auditors were not paid additional fees for either the year ended December 31, 2008 or the fiscal year ended December 31, 2007 for assurance and related services reasonably related to the performance of the audit or review of our financial statements.





31


Tax Fees





The Independent Auditors were not paid fees for the year ended December 31, 2008 or the fiscal year ended December 31, 2007 for professional services rendered for tax compliance, tax advice and tax planning during this fiscal year period.





All Other Fees





The Independent Auditors were not paid any other fees for professional services during the year ended December 31, 2008 or the fiscal year ended December 31, 2007.




PART IV.


ITEM 15.  EXHIBITS.





Incorporated by referenceExhibit
Exhibit Description
Filed herewith
Form
Period ending
Exhibit
Filing date3(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
12/29/05





32




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 its behalf by the undersigned, thereunto duly authorized.





PRIME STAR GROUP, INC.DATED: June 10, 2010
/s/ Roger H. MohlmanBy: Roger H. MohlmanIts: Chief Executive Officer and Chief Financial Officer(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)









































33