UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-KSB
 
 ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For the
fiscal year ended December 31,
2007
 
 
 TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 
 Commission
file number 001-32220
 
 AMERICAN
WATER STAR, INC.
 (Exact
name of small business issuer as specified in its charter)
  Nevada
              87-0636498(State
      or other jurisdiction of incorporation or organization)
              (IRS
      Employer Identification No.)
 
 2580
Anthem Village Dr., Suite B1
 Henderson,
Nevada 89052
 (Address
of principal executive offices)
 
 Securities
registered pursuant to Section 12(b) of the Exchange Act: None
  Securities
registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $0.001
par value
   Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act.
 Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. YesNo
 
 Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.  ̈
 
 Indicate
by checkmark whether the Company is a shell company (as defined in Rule 12b-2 of
the Exchange Act)  Yes X No ___
 
 The
issuer's revenues for its most recent fiscal year ended December 31, 2007. $-0-.
 
 The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the average bid and ask price, as of
August 2, 2007 was $373,076 based on a share value of $0.005.
 
 The
number of shares of Common Stock, $0.001 par value, outstanding on February 7,
2008 was 136,852,858 shares.
 
 
 Transitional
Small Business Disclosure Format (check
one):  Yes  No
 
  1
  AMERICAN
WATER STAR, INC
 FOR THE
YEAR ENDED
 DECEMBER
31, 2005
  Index to
Report
 on Form
10-KSB
   PART
      I
              PageItem
      1.
              Description
      of Business
              2Item
      2.
              Description
      of Property
              6Item
      3.
              Legal
      Proceedings
              6Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              6
  PART
II
  Item
      5.
              Market
      for Common Equity, Related Stockholder Matters and Small Business Issuer
      Purchases of Equity Securities
              6Item
      6.
              Management’s
      Discussion and Analysis or Plan of Operation
              8Item
      7.
              Financial
      Statements
              9Item
      8.
              Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
              9Item
      8A.
              Controls
      and Procedures
              10Item
      8B.
              Other
      Information
              10
  PART
III
  Item
      9.
              Directors,
      Executive Officers, Promoters, Control Persons and Corporate Governance;
      Compliance With Section 16(a) of the Exchange Act
              10Item
      10.
              Executive
      Compensation
              13Item
      11.
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
              13Item
      12.
              Certain
      Relationships and Related Transactions and Director
      Independence
              13Item
      13.
              Exhibits
              14Item
      14.
              Principal
      Accountant Fees and Services
              14
  2
  FORWARD-LOOKING
STATEMENTS
 
 This document contains “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995.  All statements other than statements of historical fact are
“forward-looking statements” for purposes of federal and state securities laws,
including, but not limited to, any projections of earnings, revenue or other
financial items; any statements of the plans, strategies and objections of
management for future operations; any statements concerning proposed new
services or developments; any statements regarding future economic conditions or
performance; any statements or belief; and any statements of assumptions
underlying any of the foregoing.
 
 Forward-looking statements may include
the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect”
or “anticipate” or other similar words.  These forward-looking
statements present our estimates and assumptions only as of the date of this
report.  Except for our ongoing securities laws, we do not intend, and
undertake no obligation, to update any forward-looking statement.
 
 Although we believe the expectations
reflected in any of our forward-looking statements are reasonable, actual
results could differ materially from those projected or assumed in any of our
forward-looking statements.  Our future financial condition and
results of operations, as well as any forward-looking statements, are subject to
change and inherent risks and uncertainties.  The factors impacting
these risks and uncertainties include, but are not limited to:
 
 ·
              Our
      current deficiency in working
capital;
  ·
              Our
      ability to comply with SEC reporting
  requirements;
  ·
              Loss
      of our real and personal property as a result of foreclosure or sale of
      our assets by a receiver;
  ·
              Increased
      competitive pressures from existing competitors and new
      entrants;
  ·
              Inability
      of co-packers to meet production
requirements;
  ·
              Interruption
      of critical packaging materials and/or
  flavorings;
  ·
              Unavailability
      of critical production ingredients such as sweeteners and
      plastics;
  ·
              Adverse
      state or federal legislation or regulation that increases the costs of
      compliance, or adverse findings by a regulator with respect to existing
      operations;
  ·
              Loss
      of customers or sales weakness;
  ·
              Our
      ability to collect accounts
receivable;
  ·
              Inability
      to achieve future sales levels or other operating results;
    and
  ·
              The
      unavailability of funds for capital
  expenditures.
  
 3
 Actual
future performance and results could differ from that contained in or suggested
by these forward-looking statements as a result of factors set forth in this
Form 10-KSB in particular as set forth in the “Management’s Discussion and
Analysis or Plan of Operation” under Item 6.
 
 In this
form 10-KSB references to “American Water Star,” “the Company”, “we,” “us,” and
“our” refer to AMERICAN WATER STAR, INC and its subsidiaries, unless context
otherwise determines.
 
 PART
I
 
 ITEM
1.                      DESCRIPTION
OF BUSINESS
 
 (a)
Business Development
 
 American
Water Star, Inc. was incorporated as American Career Centers, Inc., in the State
of Nevada on June 15, 1999.  The purpose of the company was to serve
as a holding company for the acquisition of information technology career
training centers and related businesses.  Effective December 3, 1999,
American Water Star acquired 100% of the outstanding shares of Tunlaw Capital
Corporation, a publicly-held reporting company, in exchange for an aggregate of
200,000 shares of common stock, with Tunlaw becoming a wholly-owned
subsidiary.  With the completion of this acquisition, American Water
Star became the successor issuer to Tunlaw, and retained public company
reporting status under the Exchange Act.  Tunlaw has had no operations
to date and is inactive.
 
 On April
2, 2002, we authorized the amendment to American Career Centers, Inc.’s Articles
of Incorporation to change its name to American Water Star, Inc., to reflect the
significant change in our character and strategic focus relating to our water
bottling and distribution business.  Subsequent to our name change we
pursued the acquisition of Water Star Bottling, Inc. as the basis of our new
business plan.  We later voided the acquisition and have since filed
an involuntary bankruptcy petition against Water Star Bottling.
 
 Acquisition of New Age
Packaging, Inc.
 
 On
December 23, 2002, we completed the acquisition of New Age Packaging, Inc. (then
known as American Distribution & Packaging, Inc.), a privately-held Nevada
corporation (“New Age”). Pursuant to that Agreement, New Age exchanged 100% of
its outstanding common stock for 5,200,000 newly issued shares of our common
stock, which was issued to former officers and directors of American Water Star
whom were shareholders of New Age pre-merger. Upon completion of the
acquisition, New Age became a wholly-owned subsidiary of American Water
Star.
 
 Although
the consideration exchanged in the New Age acquisition was not negotiated at
“arms-length,” our directors and executive officers deemed it reasonable based
on certain criteria, such as the valuation of the assets of New Age; New Age’s
current and historical business operations; the potential of New Age; and the
potential benefit to our stockholders. Our directors determined that the
consideration for the exchange was reasonable under these
circumstances.
 
 New Age
is developing a packaging process that will be an alternative to traditional
plastic bottles, glass containers and aluminum cans. This process requires
alternative manufacturing and distribution coordination as compared to
traditional bottling procedures.
 
 All of
the original equipment owned by New Age was designed to be used in the
production of bottled beverages; accordingly, it was transferred as a dividend
to American Water Star in early 2003.  In December of 2003, our Board
of Directors declared a dividend to stockholders of record as of March 15, 2004,
in the form of all of the common stock of New Age.  Due to American
Water Star’s issues with its loans with Laurus Master Fund and the delisting of
our securities from the American Stock Exchange, we have not been able to
effectuate the distribution of the NAP shares. We still believe the anticipated
business model for NAP is not compatible with our current operations and we
believe that the divestiture will have little impact on our future
operations.
 
 Acquisition of All-Star
Beverages, Inc.
 
 On
December 24, 2002, we completed the acquisition of All-Star Beverages, Inc., a
privately-held Nevada corporation (“All-Star”), pursuant to an Acquisition
Agreement dated as of September 6, 2002. Pursuant to that Agreement, All-Star
exchanged 100% of its outstanding common stock for 12,645,824 newly issued
shares of our common stock.  Roger Mohlman, our current CEO and
Chairman, received 11,103,433 of the shares issued in the exchange. Upon
completion of the acquisition, All-Star became a wholly-owned subsidiary of
American Water Star.
 
 Although
the consideration exchanged in the All-Star acquisition was not negotiated at
“arms-length,” our directors and executive officers deemed it reasonable based
on certain criteria such as the valuation of the assets of All-Star; All-Star’s
current and historical business operations; the potential of All-Star; and the
potential benefit to our stockholders. Our directors determined that the
consideration for the exchange was reasonable under these
circumstances.
 
 The
majority of our operations were conducted through All-Star. We had contractual
relationships with various independent distributors, brokers, both single and
multi-location retail operations, and governmental agencies throughout the
United States.
 
 As a
result of the All-Star and New Age acquisitions, the former stockholders of
All-Star and New Age became the controlling stockholders of American Water
Star.
 
 
 4
 
 Acquisition of Colorado
River Distributors (“C.R.D.”), Nevada Division:
 
 During the first quarter of 2005, we
entered into an agreement to purchase from Colorado River Distributors, LLC, the
distribution rights of their Nevada Division.  In addition to
purchasing the distribution rights, we purchased the existing inventory of their
Nevada Division.  Colorado River Distributors has distributing
agreements for the paper products of Arrowhead Water, Coca Cola, Gatorade, and
Tropicana.  Upon this acquisition, we established a new subsidiary;
C.R.D. of Nevada, in which we incorporated the operations of Colorado River
Distributors’ Nevada Division and consolidated the business with our operations
in Las Vegas, Nevada.
 
 Additional Subsidiaries of
American Water Star, Inc.
 
 With the purchase and completion of the
three plants in the United States, separate Nevada corporations were
incorporated for each plant.  These corporations only held the
physical assets of each plant.  The following is a list of all
subsidiaries of American Water Star owned as of December 31,
2005.  Due to the defaults with Laurus Master Fund, which is described
in more detail below, we lost all assets owned by the listed subsidiaries and no
longer operate any of the listed entities.
 
 Name
      of Subsidiary
              Date
      of Incorporation
              Operating
      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
 
 (b)
Business of Issuer
 
 American Water Star was started as a
company that developed, marketed, sold, and distributed bottled water with four
branded beverages: Hawaiian Tropic, Geyser Fruit, Geyser Sport, and Geyser
Fruta. The products were orientated to the health conscious consumer looking for
an alternative to products containing high sugar and caffeine levels. Our
customers included single and multi-store retail operations, governmental
agencies, and distributors who in turn sell to retail stores, convenience
stores, schools and other outlets.   In addition, we branched
into the private label and co-packing industries in the fourth quarter of
2004.
 
 We initially sold our products
exclusively through distributors who then supplied our products to
retailers.  Although we continued to use distributors, we also
expanded our sales effort through sales directly to retailers.  As of
December 31, 2005, we sold through distributors and directly to
customers.
 
 We had hoped the private label and
co-packaging of beverages for other corporations would allow us to avoid costly
marketing expenses that would otherwise be associated with brand development,
launch, and continuing promotions.
 
 CURRENT
OPERATIONS
 
 During the third quarter of 2005, we
entered into a “Forbearance Agreement” with Laurus Master Fund
(“Laurus”).  Pursuant to the Forbearance Agreement, Laurus agreed to
forbear taking action on our existing defaults until October 26, 2007, provided
that we did not default under the new Forbearance Agreement.  In
consideration for the Forbearance Agreement, we issued a Secured Convertible
Term Note in the principal amount of $1,286,098.61, which represented the
aggregate accrued interest and fees owed to Laurus as of July 31,
2005.
 
 On September 15, 2005, Laurus notified
us that certain Events of Default had occurred under the Second Note and
demanded payment of approximately $207,458 by September 21,
2005.  Although our operations continued through the third quarter of
2005, the impact of the default to Laurus had a negative impact on our ability
to continue operations as previously planned.
 
 During the fourth quarter of 2005, our
operations ceased and Laurus began to foreclose on all of our assets and
subsidiaries.  On November 4, 2005, Laurus again notified us that
certain defaults had occurred in the Securities Purchase Agreement, including
our failure to make interest payments on September 1, 2005, October 1, 2005 and
November 1, 2005.  In addition, we had failed to make principal and
interest payments due to Laurus on August 1, 2005, September 1, 2005, October 1,
2005 and November 1, 2005.  Based upon the occurrence and continuance
of these defaults, Laurus notified us that they had accelerated the amounts due
under the obligations, demanding payment in full on November 7, 2005 in the
amount of $6,694,875.
 
 Subsequent to November 7, 2005,
foreclosure proceedings were begun on all of our real, personal, tangible, and
intangible property, including all buildings, structures, leases, fixtures, and
moveable personal property.  On March 2, 2006, all of the real
property was sold through a foreclosure sale, and on March 23, 2006, all
personal property was sold through a UCC sale.  Pursuant to the Order
of the Court, on or about April 3, 2006, the Superior Court of the State of
Arizona in and for the County of Maricopa approved an order (i) Approving
Receiver’s Final Report; (ii) Discharging Receiver; and (iii) Dismissing Case.
Further, the Order of the Court stated as follows: “On March 2, 2006, all of the
real property of the Receivership Property was sold through a foreclosure sale
(“Real Property Sale”). Laurus purchased the real property sold at the Real
Property Sale.” “On March 23, 2006, all of the personal property of the
Receivership Property was sold through a UCC sale (“Personal Property Sale”).
Laurus purchased the personal property sold at the Personal Property Sale.”
“Following the Real Property Sale and the Personal Property Sale, substantially
all of the Company’s assets have been sold to Laurus.” The loss of the assets
included the loss of the ownership of five of our subsidiaries; All Star
Beverage, Inc., All Star Beverages Arizona, Inc., All Star Beverages Jax, Inc.,
All Star Beverages Mississippi, Inc., and Hawaiian Tropicals, Inc. Substantially
all of our assets were sold, which had a significant negative impact on our
Results of Operations.    Our results of
operations discussed for the year ended December 31, 2007 and
2006  are not indicative of future operations since during the fourth
quarter of 2005 we substantially ceased all operations and lost all assets due
to the foreclosure process by Laurus in the first quarter of
2006.
 
 5
 On
November 23, 2005, we received a letter from the American Stock Exchange
(“AMEX”) notifying us we were not in compliance with Sections 134, 1003(a)(iv),
and 1101 of AMEX’s Company Guide.  Pursuant to AMEX’s letter we were
required to submit two plans, one by December 9 and the second one by December
23, 2005, advising AMEX on the action we planned to take to become compliant by
January 5, 2006 and February 23, 2006.  On January 11, 2006, we
received notice from AMEX that we were not in compliance with their continued
listing standards and that our securities were being delisted.
 
 Personnel
 
 As of December 31, 2007 we had 1
full-time employee.  We also used the service of independent
consultants and contractors to perform various professional
services.  We believe the use of third-party service providers
enhanced our ability to contain general and administrative
expenses.  Management believes our future success will depend in large
part upon our ability to attract and retain qualified employees.  We
had no collective bargaining agreements with our employees and believe our
relations with our employees are good.
 
 ITEM
2.                      DESCRIPTION
OF PROPERTY
 
 As of
December 31, 2007, American Water Star maintained its corporate headquarters at
2580 Anthem Village Drive, Henderson NV 89052 which we currently pay
$150  month.   Prior to May 2007, we leased 4560 South
Decatur Blvd., Suite 301, Las Vegas, Nevada 89103 which was approximately 4,000
square feet of office space under a lease set to expire in April 2008. The
minimum monthly rental for the premises was approximately $8,700, plus standard,
ancillary charges, such as property taxes, insurance, and certain operating
expenses applicable to the leased premises. The lease was subject to annual rent
increases at a rate of four percent per annum.
 
 In addition, we leased property at 4545
Cameron Street, Suites A and B, Las Vegas, NV 89103.  We leased
approximately 11,000 square feet of warehouse and 4,000 square feet of office
space under a lease, set to expire in October 2006.  We initially used
this property as our warehouse space and our accounting department before
relocating the accounting office to our Arizona
facility.  Subsequently, we utilized this space for the operations of
our subsidiary, C.R.D. of Nevada.  The minimum monthly rental for the
premises was approximately $8,900, plus standard, ancillary charges, such as
property taxes, insurance, and certain operating expenses applicable to the
leased premises.  The lease was subject to an annual rent increase of
approximately $300.
 
 As previously mentioned, upon Laurus
completing its foreclosure we lost all assets and no longer operate in any of
the described properties.  In May of 2007, we signed a one-year lease
for a virtual executive suite in Henderson, Nevada whereby we currently pay $150
per month.
 
 ITEM
3.                      LEGAL
PROCEEDINGS
 
 
 On November 4, 2005, Laurus again
notified us that certain defaults had occurred in the Securities Purchase
Agreement, including our failure to make interest payments on September 1, 2005,
October 1, 2005 and November 1, 2005.  In addition, we had failed to
make principal and interest payments due to Laurus on August 1, 2005, September
1, 2005, October 1, 2005 and November 1, 2005.  Based upon the
occurrence and continuance of these defaults, Laurus notified us that they had
accelerated the amounts due under the obligations, demanding payment in full on
November 7, 2005 in the amount of $6,694,875.  In the event the
payment amount was not received by Laurus, foreclosure proceedings covered by
the Deed of Trust would begin.
 
 Subsequent to November 7, 2005,
foreclosure proceedings were begun on all of our real, personal, tangible, and
intangible property, including all buildings, structures, leases, fixtures, and
moveable personal property.  On March 2, 2006, all of the real
property was sold through a foreclosure sale, and on March 23, 2006, all
personal property was sold through a UCC sale.  Pursuant to the Order
of the Court, on or about April 3, 2006, the Superior Court of the State of
Arizona in and for the County of Maricopa approved an order (i) Approving
Receiver’s Final Report; (ii) Discharging Receiver; and (iii) Dismissing Case.
Further, the Order of the Court stated as follows: “On March 2, 2006, all of the
real property of the Receivership Property was sold through a foreclosure sale
(“Real Property Sale”). Laurus purchased the real property sold at the Real
Property Sale.” “On March 23, 2006, all of the personal property of the
Receivership Property was sold through a UCC sale (“Personal Property Sale”).
Laurus purchased the personal property sold at the Personal Property Sale.”
“Following the Real Property Sale and the Personal Property Sale, substantially
all of the Company’s assets have been sold to Laurus.” The loss of the assets
included the loss of All Star Beverage, Inc., All Star Beverages Arizona, Inc.,
All Star Beverages Jax, Inc., All Star Beverages Mississippi, Inc., and Hawaiian
Tropicals, Inc.
 
 ITEM
4.                      SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 We did
not submit any matters to a vote of our security holders during the fourth
quarter of the fiscal year 2007.
 
 PART
II
 
 ITEM
      5.
              MARKET
      FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
      PURCHASES OF EQUITY SECURITIES
 
 a)
Market Information
 
 In June
of 2004,our common
stock was approved for listing and trading on the American Stock Exchange under
the symbol “AMW.”  Prior to being listed on the American Stock
Exchange, our common stock was quoted on the OTC Bulletin Board under the symbol
“AMWS.”  Our common stock began being quoted on the OTC Bulletin Board
in December 2000.
 
 6
 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
              LOW2007(1)First
      Quarter
              $0.02
              $0.01Second
      Quarter
              $0.02
              $0.01Third
      Quarter
              $0.02
              $0.01Fourth
      Quarter
              $0.01
              $0.012006First
      Quarter
              
              $0.01
              
              $0.01Second
      Quarter
              
              $0.01
              
              $0.01$0.01
              
              $0.01Third
      Quarter
              
              $0.01
              
              $0.01Fourth
      Quarter
              
              $0.01
              
              $0.01
 
 (b)
Holders of Common Stock
 
 As of
December 31, 2007, we had approximately 670 stockholders of record
and 92,744,525 shares of common stock outstanding.
 
 (c)
Dividends
 
 We have
never paid cash dividends on our Common Stock.  We intend to follow a
policy of retaining earnings, if any, to finance the growth of the business and
do not anticipate paying any cash dividends in the foreseeable
future.  The declaration and payment of future dividends on the Common
Stock will be at the sole discretion of the Board of Directors and will depend
on our profitability and financial condition, capital requirements, statutory
and contractual restrictions, future prospects and other factors deemed
relevant.
 
 New
Age Spin-Off
 
 In
December of 2003, our Board of Directors declared a dividend to stockholders of
record on March 15, 2004, in the form of all of the common stock of New Age, one
of our wholly owned subsidiaries. As of the date of this report, the dividend
has not been paid.
 
 (d)
Securities Authorized for Issuance under Equity Compensation Plans
 
 On December 27, 2002, we adopted a
Stock Plan that allowed for 10,000,000 shares of common stock to be issued for
stock awards or pursuant to the exercise of stock options.  The
purpose of the plan was to compensate officers, directors, employees,
consultants, and certain other persons providing bona fide services to American
Water Star or to compensate officers, directors, and employees for accrual of
salary through the award of the our common stock.  The authority to
determine and oversee the administration of the plan was the Board of
Directors.  On March 1, 2004, we amended the Stock Plan which
increased the allowance of 10,000,000 shares to 30,000,000 million
shares.
  Plan
      Category
              
              Number
                of
      shares to be issued upon exercise of outstanding options, warrants and
      rights
                (a)
              
              
              Weighted-average
      exercise price of outstanding options, warrants and rights
                (b)
              
              
              Number
      of shares remaining available for future issuance under equity
      compensation plans (excluding shares reflected in column (a))
                (c)Equity
      compensation plans approved by stockholders
              
              
              0
              
              
              $
              0.00
              
              
              
              0Equity
      compensation plans not approved  by stockholders
              
              
              600,000
              (1)
              
              $
              0.77
              
              
              
              12,111,140Total
              
              
              600,000
              
              
              $
              0.77
              
              
              
              12,111,140
 (1)
              The
      directors as of August 17, 2004 all received options of 120,000 shares at
      an exercise price of $0.77.
 
 Recent
      Sales of Unregistered Securities
 
 On
November 11, 2005, we authorized the issuance of 40,000 shares of our common
stock pursuant to a subscription agreement and received $10,000.  As
of the date of this filing, the shares have not been issued.
 
 On
December 31, 2005, we authorized the issuance of 33,333,333, shares of common
stock to the Roger Mohlman Nevada Trust as conversion for notes payable to our
CEO, Roger Mohlman.  On January 1, 2006, the shares were
issued.
 
 7
 Subsequent
Issuances
 
 On January 23, 2006, we issued
6,000,000 shares of common stock to Redwood Consultants, LLC for services
performed.
 
 We
believe that the issuance of the shares described above were exempt from
registration and prospectus delivery requirements of the Securities Act of 1933
by virtue of Section 4(2). The shares were issued directly by us and did not
involve a public offering or general solicitation. The recipients of the shares
were afforded an opportunity for effective access to our files and records that
contained the relevant information needed to make their investment decision,
including our financial statements and 34 Act reports. We reasonably believed
that the recipients, immediately prior to granting the shares, had such
knowledge and experience in our financial and business matters that they were
capable of evaluating the merits and risks of their investment. The recipients
had the opportunity to speak with our management on several occasions prior to
their investment decision.
 
 Recent Issuances of
Securities Registered Pursuant to Form S-8
 
 The
following lists shows the shares issued from a Registration Statement on Form
S-8 filed on October 31, 2005.
 
 Person
      Issued to
              Date
      of Issuance
              Number
      of SharesDaniel
      Hollis
              November
      10, 2005
              2,000,000Jens
      Dalsgaard
              November
      10, 2005
              1,000,000Jens
      Dalsgaard
              January
      1, 2006
              1,000,000James
      Hibbert
              February
      23, 2006
              1,487,500Sean
      Flanagan
              March
      28, 2006
              2,287,500
 
 ITEM
      6.
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
 
 OVERVIEW
AND OUTLOOK
 
 American Water Star was started as a
company which developed, marketed, sold, and distributed bottled water with four
branded beverages: Hawaiian Tropic, Geyser Fruit, Geyser Sport, and Geyser
Fruta. The products were orientated to the health conscious consumer looking for
an alternative to products containing high sugar and caffeine levels. Our
customers included single and multi-store retail operations, governmental
agencies, and distributors who in turn sell to retail stores, convenience
stores, schools and other outlets.   In addition, we branched
into the private label and co-packing industries in the fourth quarter of
2004.
 
 We initially sold our products
exclusively through distributors who then supplied our products to
retailers.  Although we continued to use distributors, we also
expanded our sales effort through sales directly to retailers.  As of
December 31, 2005, we sold through distributors and directly to
customers.
 
 We had hoped the private label and
co-packaging of beverages for other corporations would allows us to avoid costly
marketing expenses that would otherwise be associated with brand development,
launch, and continuing promotions.
 
 CURRENT
OPERATIONS
 
 During the third quarter of 2005, we
entered into a “Forbearance Agreement” with Laurus Master Fund (“Laurus”) as a
result of having previously defaulted on our initial agreements with Laurus
dated as of October 2004.  Pursuant to the Forbearance Agreement,
Laurus agreed to forbear taking action on our existing defaults until October
26, 2007, provided that we did not default under the new Forbearance
Agreement.  In consideration for the Forbearance Agreement, we issued
a Secured Convertible Term Note in the principal amount of $1,286,098.61, which
represented the aggregate accrued interest and fees owed to Laurus as of July
31, 2005.
 
 On September 15, 2005, Laurus notified
us that certain Events of Default had occurred under the second note and
demanded payment of approximately $207,458 by September 21, 2005.
 
 Although
our operations continued through the third quarter of 2005, the impact of the
Laurus debt which was in default by the end of the third quarter was having a
negative impact on our ability to continue operations as previously
planned.  Most of our operations had completely ceased by the fourth
quarter of 2005.
 
 On November 4, 2005, Laurus again
notified us that certain defaults had occurred in the Securities Purchase
Agreement, including our failure to make interest payments on September 1, 2005,
October 1, 2005 and November 1, 2005.  In addition, we had failed to
make principal and interest payments due to Laurus on August 1, 2005, September
1, 2005, October 1, 2005 and November 1, 2005.  Based upon the
occurrence and continuance of these defaults, Laurus notified us that they had
accelerated the amounts due under the obligations, demanding payment in full on
November 7, 2005 in the amount of $6,694,875.  In the event the
payment amount was not received by Laurus, foreclosure proceedings covered by
the Deed of Trust would begin.
 
 Subsequent
to November 7, 2005, foreclosure proceedings were begun on all of our real,
personal, tangible, and intangible property, including all buildings,
structures, leases, fixtures, and moveable personal property.
 
 
 SUBSEQUENT
EVENTS
 
 On March
2, 2006, all of the real property was sold through a foreclosure sale, and on
March 23, 2006, all personal property was sold through a UCC
sale.  Pursuant to the Order of the Court, on or about April 3, 2006,
the Superior Court of the State of Arizona in and for the County of Maricopa
approved an order (i) Approving Receiver’s Final Report; (ii) Discharging
Receiver; and (iii) Dismissing Case. Further, the Order of the Court stated as
follows: “On March 2, 2006, all of the real property of the Receivership
Property was sold through a foreclosure sale (“Real Property Sale”). Laurus
purchased the real property sold at the Real Property Sale.” “On March 23, 2006,
all of the personal property of the Receivership Property was sold through a UCC
sale (“Personal Property Sale”). Laurus purchased the personal property sold at
the Personal Property Sale.” “Following the Real Property Sale and the Personal
Property Sale, substantially all of the Company’s assets have been sold to
Laurus.” The loss of the assets included the loss of the ownership of five of
our subsidiaries; All Star Beverage, Inc., All Star Beverages Arizona, Inc., All
Star Beverages Jax, Inc., All Star Beverages Mississippi, Inc., and Hawaiian
Tropicals, Inc. Substantially all of our assets were sold, which had a
significant negative impact on our Results of Operations.
 
 8
 Results
of Operations for the Years Ended December 31, 2007 and 2006.
 
 We had no
revenues for the year ended December 31, 2007.  For the year ended
December 31, 2006 we had revenues of  $35,589 as we wound down
operations.  These sales resulted in a loss as our cost of goods sold
totalled $79,406.  For the year ended December 31, 2007 our general
and administrative expenses totalled $726,000 a decrease of $1,274,647 or 63.7%
from the $2,000,647 for the year ended December 31, 2006.  For 2007,
our general and administrative expenses consisted of a consulting fee of
$240,000 to our president Roger Mohlman and rent of $486,000 paid to entities
controlled by the wife of Mr. Mohlman.  For the year-ended December
31, 2006, our general and administrative expenses consisted of $315,000 in
consulting fees to Mr. Mohlman, $486,000 in rent to entities controlled by the
wife of Mr. Mohlman; $293,000 of rent paid to non-related parties, $738,358 in
professional fees, principally involving the Laurus repossession matter, other
offices salaries of $125,000, lawsuit settlement cost of $29,750 and
miscellaneous expenses of $13,505.
 
 For the
year ended December 31, 2006, the Company also incurred a loss on the disposal
of operations of $3,178,244.  There was no similar loss for the year
ended December 31, 2007.
 
 As a
result of the foregoing, the Company incurred a loss of $726,000 or $0.01 per
share for the year-ended December 31, 2007 compared to a loss of $5,227,473 or
$0.04 per share for the year-ended December 31, 2006.
 
 Liquidity
and Capital Resources
 
 As of
December 31, 2007, the company had no cash and a deficit in working capital of
$8,354,076 compared to no cash and a deficit in working capital of $7,628,076 as
of December 31, 2006.
 
 Cash used
in operating activities totalled $243,000 for the year-ended December 31,
2007.  The 2007 amounts represent on the loss of $726,000 which was
partially offset by an increase in accounts payable and accrued expenses of
$483,000.  Cash used in operations for the year ended December 31,
2006 totalled $3,232,368 consisting of the loss of $5,227,473 which was
partially offset by a non-cash item of stock issued for services  of
$285,500 and changes to the current account consisting of a decrease in accounts
receivable and an increase in accounts payable of $1,676,476.
 
 Cash
flows from financing activities totalled $243,000 for the year ended December
31, 2007 compared to $3,181,807 for the year ended December 31,
2006.  The $243,000 for 2007 consisted entirely of advances from
related parties.  The 2006 amount consisted of a $3,346,499 advance
from a related party which was partially offset by $164,692 of a stock
subscription received.
 
 There
were no investing activities in either period.  The company currently
has insufficient liquidity to conduct its operations for the next twelve
months.  Although the company has no cash and 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.
 
 Unless,
we are able to make an acquisition with our stock or find a company with which
to merge, we will not have revenue in the next reporting period or thereafter.
We will, however, incur expenses to maintain our corporate estates and keep our
Securities Act filings current.
 
 Off-Balance
Sheet Arrangements
 
 We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.
 
 Going
Concern
 
 The accompanying financial statements
have been prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business.
As shown in the financial statements, during the years ended December 31, 2007
and 2006, the Company incurred losses from discontinued operations of $726,000
and $5,227,473, respectively. The financial statements do not include any
adjustments relating to the recoverability and classification of liabilities
that might be necessary should the Company be unable to continue as a going
concern.
 
 It is the intent of management and
significant stockholders to provide sufficient working capital necessary to
support and preserve the integrity of the corporate entity.  However,
no form commitments or arrangements to advance or loan funds to the Company or
repay any such advances or loans exist.  There is no legal obligation
for either management or significant stockholders to provide additional future
funding.
 
 ITEM
7.                      FINANCIAL
STATEMENTS
 
 See Index
to Financial Statements and Financial Statement Schedules appearing on page F-1
through F-21 of this Form 10-KSB.
 
 ITEM
      8.
              CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
 
 On February 24, 2005, we dismissed
Kelly & Company as our principal independent accountant and appointed Weaver
and Martin LLC as our principal independent accountant.
 
 On February 1, 2007, American Water
Star dismissed Weaver & Martin, LLC as its independent auditor and appointed
L.L. Bradford & Company, LLC as American Water Star’s independent
accountants for the years ended December 31, 2004 and 2005.  This is a
change in accountants recommended by American Water Star’s Audit Committee and
ratified by American Water Star’s Board of Directors.  L.L. Bradford
& Company, LLC was engaged by American Water Star on February 1,
2006.
 
 On May 8, 2006, the Registrant
dismissed L.L. Bradford & Company, LLC as its independent auditor and
appointed Gruber & Company, LLC as their independent accountants for the
years ending December 31, 2005 and 2006.  This is a change in
accountants recommended and approved by the Registrant’s Executive Management
and the Registrant’s Board of Directors.
 
 9
 ITEM
8A.                                CONTROLS
AND PROCEDURES
 
 Evaluation
of Disclosure Controls and Procedures
 
 We
maintain disclosure controls and procedures designed to ensure that information
required to be disclosed in reports filed under the Securities Exchange Act of
1934, as amended, is recorded, processed, summarized and reported within the
specified time periods. As of the date of this filing, Roger Mohlman, our Chief
Executive Officer and Principal Financial Officer, of evaluated the
effectiveness of our disclosure controls and procedures pursuant to Exchange Act
Rules 13a-15.  Based upon his evaluation, Mr. Mohlman concluded that
as of December 31, 2005, our disclosure controls and procedures were not
effective in timely alerting him to material information required to be included
in our periodic Securities and Exchange Commission filings at the reasonable
assurance level due to the material weaknesses described below.
 
 In light
of the material weaknesses described below, we performed additional analysis and
other post-closing procedures to ensure our consolidated financial statements
were prepared in accordance with generally accepted accounting principles.
Accordingly, we believe that the consolidated financial statements included in
this report fairly present, in all material respects, our financial condition,
results of operations and cash flows for the periods presented.
 
 A
material weakness is a control deficiency (within the meaning of the Public
Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or
combination of control deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected. Management has identified the
following two material weaknesses which have caused management to conclude that,
as of December 31, 2005, our disclosure controls and procedures were not
effective at the reasonable assurance level:
 
 1.
              We
      were unable to meet our requirements to timely file our Form 10-QSB for
      the period ended September 30, 2005; our Form 10-KSB for the year ended
      December 31, 2005; our quarterly reports on Form 10-QSB for the periods
      ended March 31, 2006, June 30, 2006 and September 30, 2006; our Form
      10-KSB for the year ended December 31, 2006; and our Form 10-QSB for the
      periods ended March 31, 2007 and anticipate filing our 10-QSB for the
      period ended June 30, 2007 late. Management evaluated the impact of our
      inability to timely file periodic reports with the Securities and Exchange
      Commission on our assessment of our disclosure controls and procedures and
      has concluded that the control deficiency that resulted in the inability
      to timely make these filings represented a material
    weakness.
 
 2.
              We
      did not maintain a sufficient complement of finance and accounting
      personnel with adequate depth and skill in the application of generally
      accepted accounting principles as demonstrated by significant adjustments
      to our financial statements identified by our independent registered
      accounting firm in the preparation of this quarterly report. In addition,
      we did not maintain a sufficient complement of finance and accounting
      personnel to handle the matters necessary to timely file our Form 10-KSB
      for the year ended December 31, 2005 and our Forms 10-QSB for the three
      months ended March 31, 2006, the six months ended June 30, 2006 and the
      nine months ended September 30, 2006, or the Form 10-KSB for year ended
      December 31, 2006, or the Form 10-QSB for the three months ended March 31,
      2007 and the six month ended June 30, 2007 will be
      late.  Management evaluated the impact of our lack of sufficient
      finance and accounting personnel on our assessment of our disclosure
      controls and procedures and has concluded that the control deficiency that
      resulted in our lack of sufficient personnel represented a material
      weakness.
 
 Remediation
of Material Weaknesses
 
 To
remediate the material weaknesses in our disclosure controls and procedures
identified above, we are being assisted by outside accounting personnel. We do
not believe that this outsourcing will be effective once we commence significant
operations. As a result, our internal controls may continue to be inadequate or
ineffective, which could cause our financial reporting to be unreliable and lead
to misinformation being disseminated to the public. Investors relying upon this
misinformation may make an uninformed investment decision. However, we believe,
once funding is available and have established criteria by which we will retain
the expertise required to provide adequate and effective financial
reporting.
 
 Changes
in Internal Control over Financial Reporting
 
 Except as
noted above, there were no changes in our internal control over financial
reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act,
during our most recently completed fiscal quarter that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.
 
 ITEM
8B.                                OTHER
INFORMATION
 
 None.
 
 PART
III
 
 ITEM
      9.
              DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS CONTROL PERSONS AND CORPORATE GOVERANCE;
      COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
  ACT.
 
 Name
              Age
              TitleRoger
      Mohlman
              60
              President,
      CEO, Treasurer, Chairman
 
 Duties,
Responsibilities, and Experience
 
 Roger
Mohlman has been the President, Treasurer, CEO and a Director of the
Board of American Water Star since August of 2002.  From 1986 to July
2002, Mr. Mohlman was the President of Camelot Ltd., LLC, a holding company for
various businesses, including Rumours, Delizia, and Excalibur Awards. From
January 1998 until June 2001, he was the CEO and President of Venda Tel, Inc.
and Merlin Computers, manufacturers of slot machines and telco equipment and
software. From 1981 to 1997, Mr. Mohlman was the owner of Pobeda Manufacturing,
Inc. in Mexico, a licensee for manufacturing name-brand clothing for U.S.
companies.  Mr. Mohlman has over 30 years of experience in product
licensing and business development. Prior to joining American Water Star, Mr.
Mohlman in 2001 was found guilty of a misdemeanor for unlicensed practice of
contracting in California.  Mr. Mohlman currently devotes
substantially all of his time to American Water Star and its
subsidiaries.
 
 On June 28, 2004, American Water Star
joined with other creditors and filed involuntary bankruptcy petitions against
Geyser Products, LLC and Water Star Bottling, Inc., in United States Bankruptcy
Court, District of Nevada.
 
 Arthur
de Joyawas
appointed to the Board on February 1, 2005 to fill the vacancy left by Mr.
Lieberman’s resignation and serves on the all three committees of American Water
Star.  Upon Mr. Paisley’s resignation, Mr. de Joya was appointed as
the Chairman of the Audit Committee.  Subsequent to the year ending
December 31, 2005, Mr. de Joya resigned from American Water Star’s Board of
Directors and from all positions held on the Board of Directors’
Committees.  He has over 13 years of experience in both public and
private accounting, mainly working with publicly traded
companies.  Mr. de Joya is a Certified Public Accountant licensed in
Nevada and since April 2003 he has worked as an independent accountant in Las
Vegas at De Joya & Company, a certified public accounting and consulting
firm.  Prior to being an independent accountant, Mr. de Joya worked at
L.L. Bradford & Company, LCC as a partner-in-charge of the audit practice
for approximately five years.  Mr. de Joya was employed for KMPG LLP
working with many large publicly traded companies before he began work at L.L.
Bradford & Company.  Currently, Mr. de Joya serves as the Chief
Financial Officer for GamezNFlix, Inc, a publicly traded company on the OTC
Bulletin Board.  Mr. de Joya has also served as a chief financial
officer for a publicly traded mining company, Vista Continental
Corporation.  Mr. de Joya received his B.S. in Business Administration
from the University of Nevada, Las Vegas and is a member of the American
Institute of Certified Public Accountants and Nevada Society of Certified Public
Accountants.
 
 10
 Limitation
of Liability of Directors
 
 Pursuant
to the Nevada General Corporation Law, our Articles of Incorporation exclude
personal liability for our Directors for monetary damages based upon any
violation of their fiduciary duties as Directors, except as to liability for any
breach of the duty of loyalty, acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, or any transaction
from which a Director receives an improper personal benefit. This exclusion of
liability does not limit any right which a Director may have to be indemnified
and does not affect any Director’s liability under federal or applicable state
securities laws. We have agreed to indemnify our directors against expenses,
judgments, and amounts paid in settlement in connection with any claim against a
Director if he acted in good faith and in a manner he believed to be in our best
interests.
 
 Election of Directors and
Officers.
 
 Directors
are elected to serve until the next annual meeting of stockholders and until
their successors have been elected and qualified. Officers are appointed to
serve until the meeting of the Board of Directors following the next annual
meeting of stockholders and until their successors have been elected and
qualified.
 
 Our
Executive Officers or Directors have not been the subject of any Order,
Judgment, or Decree of any Court of competent jurisdiction, or any regulatory
agency permanently or temporarily enjoining, barring, suspending or otherwise
limiting him from acting as an investment advisor, underwriter, broker or dealer
in the securities industry, or as an affiliated person, director or employee of
an investment company, bank, savings and loan association, or insurance company
or from engaging in or continuing any conduct or practice in connection with any
such activity or in connection with the purchase or sale of any
securities.
 
 Our
Executive Officers or Directors have not been convicted in any criminal
proceeding (excluding traffic violations) nor are they the subject of a criminal
proceeding which is currently pending.
 
 Our
Executive Officers or Directors have not been the subject of any pending legal
proceedings.
 
 
 Section
16(a) Beneficial Ownership Reporting Compliance
 
 Section
16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
requires our executive officers and directors, and persons who beneficially own
more than ten percent of our common stock, to file initial reports of ownership
and reports of changes in ownership with the SEC.  Executive officers,
directors and greater than ten percent beneficial owners are required by the SEC
regulations to furnish us with copies of all Section 16(a) forms they
file.  Based upon a review of the copies of such forms furnished to us
and written representations from our executive officers and directors, we
believe that as of the date of this filing, our CEO and President, Roger
Mohlman, was current in his reports under this section.
 
 Audit
Committee
 
 Prior to June 17, 2004, we did not have
an Audit Committee and our board of directors performed the necessary functions
of an Audit Committee, such as: recommending a firm of independent certified
public accountants to audit the annual financial statements; reviewing the
independent auditors independence, the financial statements, and their audit
report; and reviewing management’s administration of the system of internal
accounting controls.
 
 On June
17, 2004, we established and appointed members of the Board to the Audit
Committee in accordance with section 3(a)(58)(A) of the Securities Exchange Act
of 1934.  The Audit Committee initially was comprised of two
directors; Messrs. Paisley (Chairman) and Lieberman.  On January 31,
2005, Mr. Lieberman resigned as a director and a member of the Audit
Committee.  The board of directors for American Water Star appointed
Mr. Arthur de Joya to fill the vacancies left by Mr. Lieberman’s
resignation.  On March 8, 2005, Mr. Paisley resigned as the Chairman
of the Audit Committee and the Board appointed Mr. de Joya to serve as the new
Chairman and appointed Dr. DeBruin to serve as a member of the Audit Committee.
None of the members of the Audit Committee were or had been our officers or
employees, and each member qualified as an independent director as defined by
Section 121B(2)(c) of the American Stock Exchange Company and Section 10A(m) of
the Securities Exchange Act of 1934, and Rule 10A-3 thereunder.
 
 Upon Mr. de Joya’s resignation in
February 2006 and as a result of no longer being traded on the AMEX, we no
longer have an Audit Committee.  At the time of this filing, we only
have one officer and director so we are not able to have an independent Audit
Committee.  Our board of directors will perform some of the same
functions of an Audit Committee, such as: recommending a firm of independent
certified public accountants to audit the annual financial statements; reviewing
the independent auditors independence, the financial statements and their audit
report; and reviewing management's administration of the system of internal
accounting controls.  If and when we are able to reestablish
operations and able to appoint new members to the Board of Directors, we will
reestablish the various board committees such as the Audit
Committee.
 
 Code
of Ethics
 
 A code of ethics relates to written
standards that are reasonably designed to deter wrongdoing and to
promote:
  
 (1)
              Honest
      and ethical conduct, including the ethical handling of actual or apparent
      conflicts of interest between personal and professional
      relationships;
 (2)
              Full,
      fair, accurate, timely and understandable disclosure in reports and
      documents that are filed with, or submitted to the Commission and in other
      public communications made by an
issuer;
 (3)
              Compliance
      with applicable governmental laws, rules and
  regulations;
 (4)
              The
      prompt internal reporting of violations of the code to the Audit
      Committee; and
 (5)
              Accountability
      for adherence to the code.
 
 We adopted a corporate code of ethics
that applies to our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions in that our officers and directors serve in all the above
capacities.  We will provide an electronic or paper copy of the code
of ethics free of charge, upon request made to our Company
Secretary.  If any substantive amendments are made to the written code
of ethics, or if any waiver (including any implicit waiver) is granted from any
provision of the code to our Chief Executive Officer, Chief Financial Officer or
Corporate Controller, we will disclose the nature of such amendment or waiver in
a report on Form 8-K.
 
 Nominating
Committee
 
 Prior to
June 17, 2004, we did not have a Nominating and Corporate Governance Committee
Charter.  Our board of directors performed the necessary functions
associated with a Nominating and Corporate Governance Committee.
 
 After
June 17, 2004, we drafted a Nominating and Corporate Governance Committee
Charter and appointed members of the Board to the Committee.  The
Nominating and Corporate Governance Committee was initially with Messrs.
Paisley, Lieberman, and Dr. DeBruin, however since the resignation of Mr.
Lieberman and Mr. Paisley, Mr. de Joya joined Dr. DeBruin as a member of the
committee.  Each member of the Nominating and Corporate Governance
Committee qualified as an independent director as defined by Section 121 of the
American Stock Exchange Company Guide.  Upon the resignations of Dr.
DeBruin and Mr. de Joya, we no longer have a standing Nominating and Corporation
Governance Committee.
 
 As a
result of only having one sole officer and director we do not have the resources
to have a Nominating and Corporate Governance Committee. Our board of directors
will perform some of the functions associated with a Nominating Committee while
we recommence our operations and until we are able to appoint additional members
to the Board of Directors who would qualify to serve on the Nominating and
Corporate Governance Committee.
 
 11
 ITEM
10.                            EXECUTIVE
COMPENSATION
 
 (a)
General
 
 The following table sets forth
information concerning the total compensation that we have paid or that has
accrued on behalf of our chief executive officer and other executive officers
with annual compensation exceeding $100,000 during the most recent fiscal year
ending December 31, 2006 and for the fiscal years ending December 31, 2005 and
2004. The remuneration described in the table does not include the cost of
American Water Star’s benefits furnished to the named executive officers,
including premiums for health insurance and other benefits provided to such
individuals that are extended in connection with the conduct of American Water
Star’s business.
 
 (b)
Summary Compensation Table
 
 Name
      and Principal Position
              Year
              Annual
      Compensation
              Long
      Term CompensationSalary
              Bonus
              Other
      Annual
                Compen-sation
              Awards
              Payouts
              All
      other compen-sationRestricted
                Stock
              Options
              LTIP
                payoutsRoger
      Mohlman
                Roger
      Mohlman (1)
                Chief
      Executive Officer and President
              2007
                2006
                
                2005
              $-0.00
                $-0.00
                
                $-0-
              -0-
                -0-
                
                -0-
              -0-
                -0-
                
                -0-
              $-0-
                $-0-
                
                $-0-
              $-0-
                $-0-
                
                $-0-
              -0-
                -0-
                
                -0-
              -0-
                -0-
                
                -0-
 (1) Mr.
Mohlman has served as Chief Executive Officer, President, and director of
American Water Star since June 2002.  In July 2003, he was also named
Chairman of the Board and Chief Financial Officer of American Water
Star.  Mr. Mohlman’s salary was accrued for American Water Star’s 2003
and 2004 fiscal years.
 
 (c)
Option Grant Table
 
 Stock
Option Grants
 
 We maintained a consultant and
employee stock compensation plan at American Water Star to compensate officers,
directors, employees, consultants, and certain other persons providing bona fide
services to American Water Star or to compensate officers, directors, employees
for accrual of salary, through the award of our common stock.  The
effective date of the stock plan is December 27, 2002 and was later amended in
March of 2004.  The following table includes the current options
granted as of December 31, 2007.
 
 On August 17, 2004, in accordance
with Section 5 of American Water Star’s Stock Plan, the Board of Directors
granted to each of its directors options, pursuant to a Grants of Options
Agreement, to purchase up to 120,000 shares of its common stock at the exercise
price of $0.77 per share.
 
 EXECUTIVE
OFFICER/DIRECTOR OPTION GRANTS
 
 Name
              Year
              Number
      of securities underlying options granted
              
              Percent
      of total options granted to employees in fiscal year
              
              Exercise
      or base price ($/Share)
              
              Expiration
      DateRoger
      Mohlman
              2004
              120,000
              
              20%
              
              $0.77
              
              08/17/2009
 
 (d)
Aggregated Option Exercises and Fiscal Year-End 2006 andFiscal
Year-End 2005
 Name
              Year
              Shares
      acquired on exercise (#)
              
              Value
      Realized ($)
              
              Number
      of Securities underlying unexercised options at December 31,
      2006
              
              Value
      of unexercised options at December 31, 2005Roger
      Mohlman
              2004
              0
              
              0
              
              0
              
              0
 
 AGGREGATED
OPTION EXERCISES IN FISCAL YEAR AND OPTION VALUES
 
 (f)
Compensation of Directors
 
 During the 2007 year we did not give
our directors any compensation for their services as a director.
 
 (g)
Employment contracts and termination of employment and change-in-control
arrangements.
 
 Roger
Mohlman:Effective January 1, 2003, we entered into an employment agreement with
Roger Mohlman to serve as our President and CEO. Prior to that date, Mr. Mohlman
did not have an employment agreement. The term of the employment contract was
for one year from the effective date. The contract could be extended for an
additional two years upon both parties mutual consent. The initial annual base
compensation for 2003 was set at $120,000 (subject to increase by the Board of
Directors), stock options, annual bonus in accordance with American Water Star’s
performance, and various benefits. In February 2004, pursuant to a resolution of
the Board, the employment agreement was extended for two years and Mr. Mohlman's
base salary was set at $240,000. In 2003, we accrued the $120,000 base salary
and awarded Mr. Mohlman compensation of approximately $42,500 for his services
to us commencing in August 2002, all of which compensation was paid in April
2004.  During the year ended December 31, 2004, we accrued $101,015 in
compensation for Mr. Mohlman and during the years 2005 and 2006 did not accrue
any compensation.
 
 Termination
of Employment
 
 There are no compensatory plans or
arrangements, including payments to be received from American Water Star, with
respect to any of our executives officers, set out above which would in any way
result in payments to any such person because of his resignation, retirement, or
other termination of such person’s employment with American Water Star, or any
change in control of American Water Star, or a change in the person’s
responsibilities following a change in control of American Water
Star.
 
 COMPENSATION
COMMITTEE
 
 Prior to June 17, 2004, we did not
have a Compensation Committee Charter and the Board performed the necessary
functions related to compensation.  Subsequent June 17, 2004, a
Compensation Committee Charter was approved and members of the Board were
appointed to the Committee.  The Compensation Committee was comprised
of two directors: Messrs. De Joya and Dr. DeBrun.  Each member of the
Compensation Committee qualified as an independent director as defined by
Section 121 of the American Stock Exchange Company Guide.
 
 As a
result of currently only having one sole officer and director we do not have the
resources to have a Compensation Committee. Our board of directors will perform
some of the functions associated with Compensation Committee if we are able to
recommence our operations and until we are able to appoint additional members to
the Board of Directors who would qualify to serve on a Compensation Committee.
 
 The Compensation Committee will have
the responsibility to develop guidelines for, evaluate and approve cash and
equity compensation and benefit plans, programs, and agreements for our Chief
Executive Officer and other executive officers; to administer our stock
incentive plans; and to develop and review the Company’s compensation
philosophy.
 
 12
 ITEM
      11.
              SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS.
 
 The
following table presents information, to the best of our knowledge, about the
beneficial ownership of our common stock on July 16, 2007, held by those persons
known to beneficially own more than 5% of our capital stock and by our directors
and executive officers.
 
 The percentage of beneficial
ownership for the following table is based on 136,852,858shares of
common stock outstanding as of February 7, 2008.  Beneficial ownership
is determined in accordance with the rules of the Securities and Exchange
Commission and does not necessarily indicate beneficial ownership for any other
purpose. Under these rules, beneficial ownership includes those shares of common
stock over which the stockholder has sole or shared voting or investment power.
It also includes (unless footnoted) shares of common stock that the stockholder
has a right to acquire within 60 days after February 7, 2008 through the
exercise of any option, warrant or other right. The percentage ownership of the
outstanding common stock, however, is based on the assumption, expressly
required by the rules of the Securities and Exchange Commission, that only the
person or entity whose ownership is being reported has converted options or
warrants into shares of our common stock.
 
 Security Ownership of
Management and Certain Beneficial Owners
 
 Name
      and Address of Beneficial Owner (1), Officer, or
      Director
              
              Number
                of
      Shares (2)
              
              Percent
      of Ownership
                (3)Roger
      Mohlman,
                President,
      CEO, and Chairman (4)
              
              62,237,677
              
              45%Total
      of all Officers, Directors, and Beneficial Owners
              
              62,237,677
              
              45%
 
 (1)
              As
      used in this table, “beneficial ownership” means the sole or shared power
      to vote, or to direct the voting of, a security, or the sole or shared
      investment power with respect to a security (i.e., thepower to dispose
      of, or to direct the disposition of, a security). All addresses are care
      of the Company, 4560 South Decatur Boulevard, Las Vegas, NV
      89103.
 (2)
              The
      amount listed does not include 120,000 options granted to the directors as
      of August 17, 2004, which were to Roger Mohlman, Dale Barnhart, Dale
      Paisley, David Lieberman, and Dr. Mark
DeBruin.
 (3)
              Figures
      are rounded to the nearest tenth of a
percent.
 (4)
              This
      amount includes shares held in Mr. Mohlman’s name as well as those held in
      a Trust for Mr. Mohlman.
 
 ITEM
      12.
              CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
      INDEPENDENCE
 
 Related Party
Transactions
  During
the year ended December 31, 2007 our Chairman, Chief Executive Officer and
largest stockholder of the Company has advanced $4,434,837 to the
Company.
  Entities
controlled by the former wife of the Company's Chairman, Chief Executive Officer
and largest stockholder provided the following to the Company for the year ended
December 31, 2005 and December 31, 2004, respectively:
 
 Services:
  For
      the
                Year
      Ended
                December
      31,
                2007
              For
      the
                Year
      Ended
                December
      31,
                2007Payments
      under operating and capital leases
              $
      486,000
              486,000
  
 13
 
 ITEM  13.
              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
              12/29/0521
              List
      of Subsidiaries
              X31
              Certification
      of Roger Mohlman Chief Executive Officer, pursuant to Section 302 of the
      Sarbanes-Oxley Act
              X32
              Certification
      of Roger Mohlman, Chief Executive Officer, pursuant to Section 906 of the
      Sarbanes-Oxley Act
              X
 
 ITEM
14.                                PRINCIPAL
ACCOUNTANT FEES AND SERVICES
  2007                                                                2006
  Audit
              $10,000
              $10,000Quarterly
      Review
              $15,000
              $15,000Tax
              $-0-
              $-0-Other
              $-0-
              $-0-TOTAL
              $25,000
              $25,000
  As of
December 31, 2005, the Registrant no longer has an audit committee.
   (6) If
greater than 50 percent, disclose the percentage of hours expended on the
principal accountant's engagement to audit the registrant's financial statements
for the most recent fiscal year that were attributed to work performed by
persons other than the principal accountant's full-time, permanent
employees.
   Not
applicable.
  
 SIGNATURES
 
 Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on our behalf by the undersigned, thereunto duly
authorized.
 
 AMERICAN
      WATER STAR, INC.Date:
      April 10, 2008
                By:
                /s/ Roger
      MohlmanRoger
      MohlmanChief
      Executive Officer
                  (On
      Behalf of the Registrant and as the
                  Principal
      Financial Officer and
                  Principal
      Accounting Officer
 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
 
  /s/ Roger
Mohlman
  Chief
Executive Officer, Director
 April 10,
2008
  14
  Exhibit
21
 
 American
Water Star, Inc’s Subsidiaries
 
 Name
      of Subsidiary
              State
      of IncorporationNew
      Age Packaging, Inc.
              NevadaCRD
      of Nevada
              Nevada
 
 
  15
  INDEX
 
 REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM:
                PageReport
      on audited consolidated financial statements
                F-1FINANCIAL
      STATEMENTSConsolidated
      balance sheets as of December 31, 2007 and 2006
                F-2Consolidated
      statements of operations for the years ended December
      31,2007
      and 2006
                F-3Consolidated
      statements of stockholders' equity (deficit) for years
      endedDecember
      31, 2007 and 2006
                F-4Consolidated
      statements of cash flows for the years ended December
      31,2007
      and 2006
                F-5Notes
      to consolidated financial statements
                F-6
      –F-21
  16
  E.
Randall Gruber, CPA, PC
 Certified
Public
Accountant                                             Telephone
(636)561-5639 121 Civic Center Drive, Suite 125
 Fax (636)561-0735
 Lake
Saint Louis, Missouri  63367
 
 REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 TO THE BOARD OF DIRECTORS AND
STOCKHOLDERS OF
 AMERICAN
WATER STAR, INC. AND SUBSIDIARIES
 
 I have
audited the accompanying consolidated balance sheets of American Water Star,
Inc. and Subsidiaries as of December 31, 2007 and 2006 and the related
consolidated statements of operations, stockholders’ deficit and cash
flows  for the years then ended.  These consolidated
financial statements are the responsibility of the Company’s
management.   My responsibility is to express an opinion on these
consolidated financial statements based on my audits.
 
 I
conducted my audits in accordance with standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that I plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  I believe
that my audits provide a reasonable basis for our opinion.
 
 In my
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of American Water Star, Inc.
and Subsidiaries as of December 31, 2006 and 2005 and  the results of
its operations and cash flows for the  years then ended in conformity
with accounting principles generally accepted in the United States of
America.
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  As described in Note 2 and 7 to the
consolidated financial statements conditions exist which raise substantial doubt
about the Company’s ability to continue as a going concern unless it is able to
generate sufficient cash flows to meet its obligations and sustain its
operations.  Those conditions raise substantial doubt about its
ability to continue as a going concern.  Management’s plans regarding
those matters are also described in Note 2.  The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
 
 
 
 Lake
Saint Louis, Missouri
 
 Member:  American
Institute of Certified Public Accountants
 Registered:  Public
Company Accounting Oversight Board  (PCAOB)
  17
  American
      Water Star, Inc.Consolidated
      Balance SheetsDecember
      31,
              
              
              December
      31,2007
              
              
              2006AssetsCurrent
      assets:Cash
              
              $
              -
              
              
              $
              -Accounts
      receivable
              
              
              -
              
              
              
              -Total
      current assets
              
              
              -
              
              
              
              -Total
      assets
              
              $
              -
              
              
              $
              -Liabilities
      and Stockholder's EquityCurrent
      liabilities:Accounts
      payable
              
              
              3,874,239
              
              
              
              3,631,239Accrued
      liabilities
              
              
              45,000
              
              
              
              45,000Accrued
      compensation - chairman and majority stockholder
              
              
              616,015
              
              
              
              376,015Advances
      from related parties
              
              
              3,818,822
              
              
              
              3,575,822Total
      current liabilities
              
              
              8,354,076
              
              
              
              7,628,076Stockholders'
      equityPreferred
      stock, $0.0001 par value, 20,000,000 shares
              
              
              -
              
              
              
              -authorized,
      no shares issued.Series
      A preferred convertible, 4,100,0000 shares
              
              
              -
              
              
              
              -authorized,
      no shares issuedCommon
      stock, $0.0001 par value, 150,000,000 sharesauthorized,
      136,852,858 and 136,852,858 shares issuedand
      outstanding as of 12/31/07 and 12/31/06
              
              
              13,685
              
              
              
              13,685Stock
      bought or for services not issued 720,000 and 720,000shares
      at 12/31/07and 12/31/06
              
              
              72
              
              
              
              72Common
      stock subscribed
              
              
              10,000
              
              
              
              10,000Additional
      paid-in capital
              
              
              37,755,580
              
              
              
              37,755,580Accumulated
      (deficit)
              
              
              (46,133,413
              )
              
              
              (45,407,413
              )Total
      stockholders' equity
              
              
              (8,354,076
              )
              
              
              (7,628,076
              )Total
      liabilities and stockholders' equity
              
              $
              -
              
              
              $
              -
 
 See noted
to consolidated financial statements
  18
  
 American
      Water Star, Inc.Consolidated
      Statements of Cash Flows From Discontinued OperationsFor
      the year endedDecember
      31,2007
              
              
              2006Cash
      flows from operating activities:Net
      loss from discontinued operations
              
              $
              (726,000
              )
              
              $
              (5,227,473
              )Adjustments
      to reconcile net loss to net cash usedin
      operating activitiesStock
      issued for services
              
              
              --
              
              
              
              285,500Changes
      in operating assets and liabilitiesAccounts
      receivable
              
              
              --
              
              
              
              33,129Accounts
      payable and accrued expenses
              
              
              483,000
              
              
              
              1,676,476Net
      cash used in operating activities
              
              
              (243,000
              )
              
              
              (3,232,368
              )Cash
      flows from financing activitiesShares
      issued for debt - related partyStock
      subscription received
              
              
              --
              
              
              
              (164,692
              )Advances
      from related parties
              
              
              243,000
              
              
              
              3,346,499Net
      cash provided from financing activities
              
              
              243,000
              
              
              
              3,181,807Net
      increase (decrease) in cash
              
              
              --
              
              
              
              (50,561
              )Cash
      - beginning
              
              
              --
              
              
              
              50,561Cash
      - ending
              
              $
              --
              
              
              $
              --Supplemental
      disclosures:Interest
      paid
              
              $
              --
              
              
              $
              503,069Income
      taxes paid
              
              $
              --
              
              
              $
              --Supplemental
      schedule of noncash investing and financing activities:Long-term
      debt retired by foreclosure on property, plantand
      equipment
              
              $
              --
              
              
              $
              6,932,351Liabilities
      and accrued expenses assumed by related parties
              
              
              --
              
              
              
              3,173,215
 
 See noted
to consolidated financial statements
  19
  American
      Water Star, Inc.Consolidated
      Statements of Changes in Stockholders' EquityUnamortized
              
              
              StockAdditional
              
              
              cost
      of
              
              
              Earned
              
              
              Stock
              
              
              Common
              
              
              
              
              
              TotalCommon
      Stock
              
              
              Paid-in
              
              
              Shares
      Issued
              
              
              for
      Services
              
              
              Issuance
              
              
              Stock
              
              
              Accumulated
              
              
              Stockholders'Shares
              
              
              Amount
              
              
              Capital
              
              
              for
      Services
              
              
              Not
      Issued
              
              
              Obligation
              
              
              Subscribed
              
              
              (Deficit)
              
              
              EquityBalance,
      December 31, 2004
              
              
              80,227,858
              
              
              $
              8,023
              
              
              $
              32,864,840
              
              
              $
              (119,879
              )
              
              
              72
              
              
              
              -
              
              
              $
              -
              
              
              $
              (23,344,304
              )
              
              $
              9,408,752Warrants
      issued to Laurus forconvertible
      debenture
              
              
              
              
              
              
              
              
              
              
              114,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              114,000Common
      stock subscribed
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              10,000
              
              
              
              
              
              
              
              10,000Amortization
      of unearned services
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,171,820
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,171,820Warrants
      issued for services
              
              
              
              
              
              
              
              
              
              
              107,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              107,000Common
      stock issued for services
              
              
              12,516,667
              
              
              
              1,251
              
              
              
              2,686,739
              
              
              
              (1,051,941
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,636,049Stock
      issuance obligation to CEOto
      settle notes payable
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,700,000
              
              
              
              
              
              
              
              
              
              
              
              1,700,000Net
      loss for the yearended
      December 31, 2005
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (16,835,636
              )
              
              
              (16,325,636
              )Balance,
      December 31, 2005
              
              
              92,744,525
              
              
              $
              9,274
              
              
              $
              35,772,579
              
              
              $
              -
              
              
              $
              72
              
              
              $
              1,700,000
              
              
              $
              10,000
              
              
              $
              (40,179,940
              )
              
              $
              (2,688,015
              )Paid-in
      capital adjustment
              
              
              
              
              
              
              
              
              
              
              1,912
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,912Common
      stock issued for services
              
              
              10,775,000
              
              
              
              1,078
              
              
              
              284,422
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              285,500Common
      stock issued
              
              
              33,333,333
              
              
              
              3,333
              
              
              
              1,696,667
              
              
              
              
              
              
              
              
              
              
              
              (1,700,000
              )Net
      loss for the yearended
      December 31, 2006
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (5,227,473
              )
              
              
              (5,227,473
              )Balance,
      December 31, 2006
              
              
              136,852,858
              
              
              
              13,685
              
              
              
              37,755,580
              
              
              
              -
              
              
              
              72
              
              
              
              -
              
              
              
              10,000
              
              
              
              (45,407,413
              )
              
              
              (7,628,076
              )Net
      loss for the yearended
      December 31, 2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (726,000
              )
              
              
              (726,000
              )Balance,
      December 31, 2007
              
              
              136,852,858
              
              
              $
              13,685
              
              
              $
              37,755,580
              
              
              $
              -
              
              
              $
              72
              
              
              $
              -
              
              
              $
              10,000
              
              
              $
              (46,133,413
              )
              
              $
              (8,354,076
              )
 
 
 See noted
to consolidated financial statements
  20
 American
Water Star, Inc. and Its Subsidiaries
 Notes to
the Consolidated Financial Statements
 As of
December 31, 2007
  
 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.
 
 Use of
Estimates
 
 The
preparation of our consolidated financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and the disclosures of contingent assets and
liabilities in our consolidated financial statements and accompanying
notes.  Although these estimates are based on our knowledge of current
events and actions we may undertake in the future, actual results may ultimately
differ from estimates and assumptions.
 
 Principles
of Consolidation
 
 The
accompanying consolidated financial statements include the accounts of American
Water Star, Inc. a Nevada corporation and its wholly owned subsidiaries, New Age
Packaging and Distribution, Inc., and Colorado River Distribution, LLC and are
prepared in accordance with accounting principles generally accepted in the
United States.  The accompanying financial statements reflect the
results of operations and financial condition of
 New Age
Packaging and Distribution, Inc. and Colorado River Distribution,
LLC.
 
 During
2005, we entered into an agreement to purchase from Colorado River Distributors,
LLC, the distribution rights of their Nevada division for the amount of
$103,000.  In addition to purchasing the distribution rights, we
purchased the existing inventory of their Nevada Division for
$55,216.
 
 As more
fully described in notes 2 and 7, on March 2, 2006 and March 23, 2006, all of
the Company’s personal and real property were sold through a UCC sale for the
benefit of a secured creditor.  Substantially all of the Company’s
assets were sold and the Company was fully released and discharged from it’s
obligation to Laurus Master Fund.  Included in the assets was All Star
Beverage, Inc.   These financial statements include the
operations of All Star Beverage, Inc. through March 2, 2006.
 
 Risks and
Uncertainties
 
 The
Company’s operations could be adversely affected by restrictions on sources of
supply; advertising effectiveness; changes in labeling requirements; changes in
governmental regulations; changes in the rate of taxation; the expropriation of
private enterprise; or product issues such as a product recall.  The
foregoing list of risks and uncertainties is not exclusive.  We
monitor our operations with a view to minimizing the impact to our overall
business that could arise as a result of the risks inherent in our
business.
 
 Loss per
Share
 
 Net loss
per share is provided in accordance with Statement of Financial Accounting
Standards No. 128 (SFAS #128) “Earnings Per Share”.  Basis loss per
share is computed by dividing losses available to common stockholders by the
weighted average number of common shares outstanding during the
period.  There were no securities considered to be dilutive in the
computation of loss per share.
 
 Trade
Accounts Receivable
 
 We record
trade accounts receivable at net realizable value.  This value
includes an appropriate allowance for estimated uncollectible accounts to
reflect any loss anticipated on the trade accounts receivable balances and
charged to the provision for doubtful accounts.  We calculate the
allowance based on our history of write-offs, level of past due accounts based
on the contractual terms of the receivables and our relationships with and
economic status of our customers.
 
 Inventories
 
 Inventories
consist primarily of raw materials, supplies, concentrates and syrups and are
valued at the lower of cost or market.  We determine cost on the basis
of average cost or first-in, first-out methods.
 
 Stock
Based Compensation
 
 Common
stock, warrants and options issued for services by non-employees is accounted
for based on the fair market value at the date the services are
performed.  If the services are to be performed over a period of time
the value is amortized over the life of the period that services are
performed.
 
 We
account for our stock option plan in accordance with the provisions of SFAS No.
123, “Accounting for Stock Based Compensation.”  SFAS No. 123 permits
entities to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of the grant.
 
 
 21
 
 Income
Taxes
 
 We
account for income taxes under SFAS 109, “Accounting for Income
Taxes”.  The asset and liability approach requires the recognition of
deferred tax liabilities and assets for the expected future tax consequences of
temporary differences between the carrying amounts and the tax basis of assets
and liabilities.  The provision for income taxes differ from the
amounts currently payable because of temporary differences in the recognition of
certain income and expense items for financial reporting and tax reporting
purposes.
 
 Fair
Value of Financial Instruments
 
 The
carrying value of current assets and liabilities reasonably approximates their
fair value due to their short maturity periods.  The carrying value of
our debt obligations reasonably approximates there fair value at the stated
interest rate approximates current market interest rates of debt with similar
terms that is available to us.
 
 Earnings
per Common Share
 
 SFAS No.
128, “Earnings per Share” requires presentation of “basic” and
“diluted.”  This standard requires dual presentation of basic and
diluted earnings per share on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the numerator
and denominator of the diluted loss per share computations.
 
 Potentially
issuable shares of common stock pursuant to outstanding stock options and
warrants are excluded from the diluted computation, as their effect would be
anti-dilutive.
 
 Cash and
Cash Equivalents
 
 Cash and
cash equivalents include cash in banks and certificates of deposit that mature
within three months of the date of purchase.
 
 Property,
Plant and Equipment
 
 We state
property, plant and equipment at cost and depreciate such assets principally by
the straight-line method over the estimated useful lives of the
assets.  Management assesses the recoverability of the carrying amount
of property, plant and equipment if certain events or changes occur, such as a
significant decrease in market value of the assets or a significant change in
the business conditions in a particular market.  The estimated useful
lives of the assets or the lease term based on the following life
expectancy:
  LifeComputer
      equipment
                5Software
                3Office
      furniture and fixtures
                7Bottling
      equipment
                7
      -10Leasehold
      improvements
                Life
      of leaseBuildings
                30
 
 Depreciation
commences upon implementation of the asset.  Repairs and maintenance
expenditures are charged to operations as incurred.  Major
improvements and replacements which extend the useful life of an asset, are
capitalized and depreciated over the remaining estimated useful life of the
asset.  When assets are retired or sold, the costs and accumulated
depreciation and amortization are eliminated and any resulting gain or loss is
reflected in operations.
 
 Derivative
Financial Instruments
 
 We
account for derivative financial instruments in accordance with SFAS No. 133,
“Accounting for Derivative Instruments and Hedging Activities,” as amended by
SFAS No. 137, SFAS No. 138, and SFAS No. 149.  Our Company recognizes
all derivative instruments as either assets or liabilities at fair value in our
consolidated balance sheets.
 
 Advertising
Costs
 
 The
Company expenses all costs of advertising as incurred.  There were
$-0- and $-0- advertising costs included in general and administrative expenses
as of December 31, 2007 and 2006.
 
 Revenue
Recognition
 
 Revenue
from the sale of our products is recorded when all of the following criteria are
met:
 
 Persuasive evidence of an arrangement
exists,
 
 Delivery has occurred or services have
been rendered,
 
 Our price to the buyer is fixed and
determinable, and
 
 Collectibility is reasonably
assured.
 
 Sales are
recorded net of discounts, rebates and promotional costs.
 
 
 22
 
 
 Debt
issue costs
 
 Costs
related to securing our long-term debt are recorded as an asset and are
amortized over the life of the debt.
 
 Long-lived
Assets
 
 We review
the carrying value of long-lived assets at each balance sheet date if indication
of impairment exists.  Recoverability is assessed using undiscounted
cash flows based upon historical results and current projections of earnings
before interest and taxes.  Impairment is measured using discounted
cash flows of future operating results based upon a rate that corresponds to the
cost of capital.  Impairments are recognized in operating results to
the extent that carrying value exceeds discounted cash flows of future
operations.  At December 31, 2005, we recognized an impairment expense
in the amount of $1,654,949.
 
 Recently
Issued Accounting Standards
 
 In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Liabilities, including an amendment of FASB Statement No.
115" ("SFAS No. 159"). SFAS No. 159 permits entities to choose, at specified
election dates, to measure many financial instruments and certain other items at
fair value that are not currently required to be measured at fair value.
Unrealized gains and losses shall be reported on items for which the fair value
option has been elected in earnings at each subsequent reporting date. SFAS No.
159 is effective for fiscal years beginning after November 15, 2007. Early
adoption is permitted as of the beginning of a fiscal year that begins on or
before November 15, 2007, provided the entity also elects to apply the
provisions of SFAS No. 157 "Fair Value Measurements" ("SFAS No. 157"). The
Company is currently assessing the impact that SFAS No. 159 will have on
its financial statements.
 
 In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51.  This statement clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements.  This statement changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to both parent and the
noncontrolling interest.  This statement is effective for the fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008.  Based on current conditions, the Company does not
expect the adoption of SFAS 160 to have a significant impact on its results of
operations or financial position.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations.”  This statement replaces FASB Statement No. 141,
“Business Combinations.” This statement retains the fundamental requirements in
SFAS 141 that the acquisition method of accounting (which SFAS 141 called
the purchase method) be used for all business combinations and for an acquirer
to be identified for each business combination. This statement defines the
acquirer as the entity that obtains control of one or more businesses in the
business combination and establishes the acquisition date as the date that the
acquirer achieves control. This statement requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the statement. This statement applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The Company does not expect the adoption of SFAS 160 to have
a significant impact on its results of operations or financial
position.
 
 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, 2007 and 2006, the Company incurred
losses from operations of $726,000 and $5,227,473, respectively. The financial
statements do not include any adjustments relating to the recoverability and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. As further discussed in Note 7, on
November 4, 2005, Laurus Master Fund (“Laurus”)notified the Company that certain
defaults had occurred in the Securities Purchase Agreement, including the
Company’s failure to make interest payments on September 1, 2005, October 1,
2005 and November 1, 2005.  In addition, the Company had failed to
make principal and interest payments due to Laurus Master Fund on August 1,
2005, September 1, 2005, October 1, 2005 and November 1, 2005.  Based
upon the occurrence and continuance of the defaults, the Company was notified
that Laurus had accelerated the amounts due under the obligations, demanding
payment in full on November 7, 2005 in the amount of $6,694,875.  In
the event the payment amount was not received by Laurus by the due date,
foreclosure proceedings covered by the Deed of Trust would begin.
 
 Subsequent
to November 7, 2005, foreclosure proceedings were begun on all of the Company’s
real, personal, tangible, and intangible property, including all buildings,
structures, leases, fixtures, and moveable personal property.  On
March 2, 2006, all of the real property was sold through a foreclosure sale, and
on March 23, 2006, all personal property was sold through a UCC
sale.  Substantially all of the Company’s assets were sold and the
Company was fully released and discharged from it’s obligation to
Laurus.
 
 
 23
 
 
 
 
 3.  Accounts
Receivable
 
 Trade
accounts receivable are stated at the amount the Company expects to
collect.  The Company maintains allowances for doubtful accounts for
estimated losses resulting from the inability of its customers to make required
payments.  Management considers the following factors when determining
the collectibility of specific customer accounts; customer credit-worthiness,
past transaction history, current economic and industry trends, and changes in
customer payment terms.  If the financial condition of the Company’s
customers were to deteriorate, adversely affecting their ability to make
payments, additional allowances would be required.
 
 4.  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 $ 616,015 and $ 376,015 at December 31, 2007 and
2006.
 
 5.  Long-term
Convertible Debt
 
 On
October 28, 2004, we issued a $5,000,000 secured convertible note (“Note”) to
Laurus Master Fund, Ltd. (“Laurus”).  The note was convertible into
shares of our common stock at an initial conversion price of $0.57 per
share.  Pursuant to this agreement, we also issued to Laurus a warrant
(“Warrant”) to purchase up to 2,543,860 shares of our common stock at an
exercise price of $0.66.  The warrant expires on October 28,
2009.  The unamortized cost of the warrants issued to Laurus of
$322,515 accretes to interest expense over the period of the loan based on the
interest method.  The accreted amount of the unamortized cost of
warrants was $290,116 and $32,399 for the years ended December 31, 2005 and
2004, and these amounts were reported as interest expense.  There was
a beneficial conversion feature to the convertible note totaling $234,796 based
on the difference between the conversion price and the trading price of our
common stock.  For the years ended December 31, 2005 and 2004, the
amount of accretion to interest expense resulting from the beneficial conversion
was $224,075 and $10,721.
 
 The Note
had a term of three years and accrued interest at the prime rate plus 3% per
year.  All of our assets serve as security for this
Note.  Interest on the principal amount was payable monthly, in
arrears, on the first business day of each calendar month commencing December 1,
2004.  In addition, effective February 1, 2005, we were required to
make monthly principal payments in the amount of $151,515 per month, continuing
until the maturity date.  Under the terms of the Note, the monthly
interest payment and the monthly principal payment are payable either in cash at
102% of the respective monthly amortization amount, or, if certain criteria are
met, in shares of our common stock.  The principal criteria for the
monthly payments to be made in shares of our common stock include:
 
 ·
              the
      effectiveness of a current registration statement covering the shares of
      our common stock into which the principal and interest under the note are
      convertible;
 ·
              an
      average closing price of our common stock for the previous five trading
      days greater than or equal to 110% of the fixed conversion price;
      and
 ·
              the
      amount of such conversion not exceeding 25% of the aggregate
      dollar-trading volume of our common stock for the previous 22 trading
      days.
   Upon an
event of default under the Note, Laurus may demand repayment of the outstanding
principal balance at a rate of 130% of the Note plus any accrued
interest.
   On a
month-by-month basis, if we register the shares of our common stock issuable
upon conversion of the Note and upon exercise of the Warrant on a registration
statement declared effective by the Securities and Exchange Commission, and the
market price of our common stock exceeds the conversion price by at least 25%
for five consecutive trading days, then the interest rate of the Note for the
succeeding calendar month shall be reduced by 1% for every 25%
increase in the market price of our common stock above the conversion price of
the Note, but in no event shall the interest rate be less than 6%.
   Laurus
also had the option to convert all or a portion of the Note into shares of our
common stock at any time, subject to limitations described below, at a
conversion price of $0.57 per share, subject to adjustment as described
below.  At December 312, 2004, the maximum amount of conversion that
Laurus could convert was 3,898,136 shares of our common stock.
   Laurus
was limited on its ability to convert if the conversion of the Note or the
exercise of the Warrant would cause the shares then held by Laurus to exceed
4.99% of our outstanding shares of common stock unless there had been an event
of default or Laurus provided us with 75 days prior notice.
   We were
obligated to file a registration statement with the Securities and Exchange
Commission registering the resale of shares of our common stock issuable upon
conversion of the Note and exercise of the Warrant by December 12, 2004, and to
have such Statement declared effective by the SEC not later than February 5,
2005.  We timely filed the registration statement.
   On
February 28, 2005, the Company entered into an “Amendment and Waiver Agreement”
with Laurus in connection with the financing agreement entered into on October
28, 2004.  The amended Agreement provides for payment of accrued
interest, principal and fees, pursuant to the original note in the form of a
warrant to purchase 1,500,000 shares of the Company’s common stock with an
exercise price of $0.50 per share.
   On July
22, 2005 in order to satisfy a default under the terms of the Laurus note (“the
first note”), the Company entered into various agreements with Laurus relating
to, supplementing and amending the prior agreements.  Laurus agreed to
forbear from taking action on existing defaults until October 26,
2007.  In consideration of Laurus forbearance, the Company issued
Laurus a Secured Convertible Term Note in the principal amount of $1,286,099
(the “Second Note”) representing the aggregate accrued interest and fees owed by
the Company to Laurus as of July 31, 2005.  Under the terms of the
second note, interest would be paid monthly, in arrears, commencing on September
1, 2005 until October 26, 2007, the Maturity Date.  Principal and any
unpaid interest is due on the Maturity Date.  The Second Note was
issued in addition to, and not in replacement or satisfaction of, the First
Note.
   24
 
   On
November 4, 2005, Laurus notified us via certified mail that certain Forbearance
Defaults had occurred, and were continuing due to our failure to make payments
of interest to Laurus on September 1, 2005, October 1, 2005 and November 1, 2005
in accordance with the requirements of the July 22, 2005 note, and regularly
scheduled payments of principal and interest to Laurus on August 1, 2005,
September 1, 2005, October 1, 2005 and November 1, 2005 under and in accordance
with the terms of the October, 2004 note.  Based upon the occurrence
and continuance of the defaults, Laurus notified us that all obligations and
liabilities owed to Laurus are accelerated.  Demand was made in the
amount of $6,694,875, constituting all obligations and liabilities to Laurus as
of November 7, 2005.  If the payment was not received by Laurus by
November 7, 2005, Laurus would exercise its rights and remedies against us under
the Note documents and applicable law, including without limitation the
immediate commencement of foreclosure proceedings against our real property
covered by the Deed of Trust.
   On
November 23, 2005, we received a Notice of Trustee’s Sale in which Laurus
notified us that all real property interests, including all property and
fixtures described under the Deed of Trust, Assignment of Rents. Security
Agreement and Fixture Filing executed by us and recorded on July 28, 2005 in the
Official Records of Maricopa County, Arizona would be sold to the highest bidder
on March 2, 2006 .
   On May 8,
2006 in the Superior Court of the State of Arizona in the county of Maricopa,
Case number CV2006-001476, Laurus Master Fund, Ltd. an order was filed granting
motion for an entry of order (i) approving the receiver’s final report, (ii)
discharging the receiver, and (iii) dismissing the case against
us.  The Court found that the Court appointed receiver over all of the
real, personal, tangible and intangible property of the Company, including all
buildings, structures, leases, fixtures, and movable personal property had
fulfilled all of its duties under the Appointment Order, had engaged in the
following activities:
   1.
              Engaged
      in correspondence with Laurus and its various representatives regarding
      the status and security of the receivership
  property;
 2.
              Secured
      possession of real and personal property constituting the Receivership
      Property;
 3.
              Conducted
      site tours of the real property to ensure the security of Receivership
      Property;
 4.
              Monitored
      the limited operations of the Company and its employees to ensure the
      security of the Receivership
Property;
 5.
              Verified
      the ownership of certain items of personal property owned by third parties
      and monitored removal of those items of personal property from the
      Receivership Property;
 6.
              Attended
      (1) hearing on “Application for Order to Show Cause Why a Receiver Should
      Not be Appointed; (2) foreclosure sale; and (3) UCC personal property
      sale.
   The Court
found that the Receiver had fully complied with and discharged all of its
obligations under the Appointment order, and was released from any and all
claims relating to its roles and duties under the Appointment
Order.  The Case, including all claims and counterclaims, was
dismissed with prejudice, with each side to bear their own fees and
costs.
   The
Receiver’s Final Report reporting that on March 2, 2006, all of our real
property was sold through a foreclosure sale (Real Property Sale).  In
addition, on March 23, 2006 all of our personal property was sold through a UCC
sale (Personal Property Sale).  Following the Real Property Sale and
the Personal Property Sale, substantially all of our assets had been sold in
satisfaction of Laurus claims.
  
 6.  Commitments
and Contingencies
 
 Legal
proceedings
 
 The
Company is involved in various unresolved legal actions, administrative
proceedings and claims in the ordinary course of business.  Although
it is not possible to predict with certainity the outcome of these unresolved
actions, the Company believes these unresolved legal actions will not have a
material effect on its financial position or results of operation.
 
 Operating
Leases
 
 We have
lease agreements and arrangements, whereby we lease warehouse and operating
facilities.  Each lease expired on or before January 1,
2008.  For the years ended December 31, 2007 and 2006 our rent expense
was approximately $486,000 and $779,000 respectively.
 
 During
the year ended December 31, 2005, we became delinquent on building lease
payments to a non-related party.  Under the terms of the lease
agreement we were locked-out, and under the terms of a court order, the lessor
enforced their lien and took possession of our personal property to satisfy the
payment of the delinquent lease.
 
 25
 License
Agreements
 
 In
January, 2003, the Company entered into an agreement with a corporation that
owns the licensing rights to a consumer product trademark.  The
agreement provides the Company with a three-year exclusive license to produce,
market and sell flavored water bearing the trademark name in the United States
and Canada.  In consideration, the Company agreed to pay a royalty of
four percent of invoice sales (net of shipping and sales taxes), payable each
quarter.  The agreement calls for a guaranteed minimum annual royalty
fee of $40,000 in 2003, $120,000 in 2004 and $200,000 in 2005.  The
agreement may be renewed at the option of the Company provided certain minimum
sales have occurred.  Royalty expense was $-0- and $-0- for the years
ended December 31, 2007 and 2006.
 
 7.  Impairment
Charges on Equipment
 
 As a
result of the foreclosure and subsequent trustee’s sale by Laurus, we have
recorded an impairment in the carrying value of our property, plant and
equipment of $1,654,949 at December 31, 2005.
 
 8.  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, 2007 and 2006.  There is
approximately $46,000,000 of net operating loss carry-forward, which expires
beginning in 2022.  the net deferred tax is as follows:
  For
      the Years Ended December 31,2007
                
                
                2006Non-current
      deferred tax assets (liabilities):
                  Net operating loss
      carry-forward
                
                $
                14,052,000
                
                
                $
                13,835,000Valuation
      allowance
                
                
                (14,052,000
                )
                
                
                (13,835,000
                )$
                ---
                
                
                $
                ---
 
 
 A
reconciliation of the provision for income taxes to the statutory federal rate
(34%) for continuing operations is as follows:
 
 
 For
      the Years Ended December 31,2007
                
                
                2006Statutory
      tax benefit
                
                $
                (246,840
                )
                
                $
                (1,680,000
                )Non-deductible
      expense
                
                
                164,220
                
                
                
                316,000Valuation
      allowance
                
                
                82,620
                
                
                
                5,871,000$
                ----------
                
                
                $
                ----------
 10.           Related Party
Transactions
  During
the year ended December 31, 2007 our Chairman, Chief Executive Officer and
largest stockholder of the Company has advanced $4,434,837 to the
Company.
  Entities
controlled by the former wife of the Company's Chairman, Chief Executive Officer
and largest stockholder provided the following to the Company for the year ended
December 31, 2005 and December 31, 2004, respectively:
 
 Services:
  For
      the
                Year
      Ended
                December
      31,
                2007
              
              
              For
      the
                Year
      Ended
                December
      31,
                2007Payments
      under operating and capital leases
              
              $
              486,000
              
              
              
              486,000
 11.  Equity
Transactions
  During the first quarter
2005:
  On
February 28, 2005, the Company issued Laurus a warrant to purchase 1,500,000
shares of common stock with a purchase price of $0.50 pursuant to an Amendment
and Waiver Agreement for the purpose of amending the terms of the previous
Secured Convertible Term Note, the Securities Purchase Agreement, and the
Registration Rights Agreement, all dated October 26, 2004.  The
warrant has a five year term.  The value of the warrants, according to
a Black-Sholes calculation, was $114,000.
  During the second quarter
2005
  On June
10, 2005, the Company granted a warrant to purchase 1,000,000 shares of common
stock with a purchase price of $0.20 to a consultant for the Company pursuant to
the Company’s Stock Plan and a Consultant Agreement.  The warrant has
a five year term.  The value of the warrants, according to a
Black-Sholes calculation, was $107,000.
 
 During the third quarter
2005
 
 On July
20, 2005, the Company issued 6,750,000 shares of its common stock for
services.  The fair value o these shares at the date of issuance was
$1,485,000.
 
 On August
16, 2005, the Company issued 1,500,000 shares of its common stock for
services.  The fair value o these shares at the date of issuance was
$320,000.
 
 
 26
 On
September 9, 2005 the Company issued 16,667 post 1:12 split shares of its common
stock to an investor in the Company’s predecessor, American Career
Centers.  The investor had purchased 200,000 shares prior to the split
on March 12, 2002 for $20,000 but the shares were never issued.
 
 On
September 13, 2005, the Company issued 300,000 shares of its common stock for
services.  The fair value of these shares at the date of issuance was
$87,000.
 
 On
September 16, 2005, the Company issued 950,000 shares of its common stock for
services.  The fair value of these shares at the date of issuance was
$266,000.
 
 During the fourth quarter of
2005
 
 Subscribed
for 40,000 shares of its common stock and received $10,000.
 
 On
November 10, 2005 the Company issued 3,000,000 shares of its common stock for
services.  The fair value of these shares at the date of issuance was
$510,000.
 
 During the first quarter,
2006
 
 On
January 6, 2006, the Company issued 33,333,333 shares of its common stock to
retire a note payable from its’ Chairman, and major stockholder.  The
fair value of these shares at the date of issuance was $1,700,000.
 
 On
January 23, 2006 the Company issued 7,000,000 shares of its common stock for
services.  The fair value of these shares at the date of issuance was
$210,000.
 
 On
February 23, 2006, the Company issued 1,487,500 shares of its common stock in
settlement of a lawsuit.  The fair value of these shares at the date
of issuance was $29,750.
 
 On March
28, 2006, the Company issued 2,287,500 shares of its common stock for legal
services rendered.  The fair value of these shares at the date of
issuance was $45,750.
 
 On
November 18, 2005, the Board of Directors authorized Roger Mohlman’s request to
convert the notes payable to him by the Company into shares of the Company’s
common stock thereby reducing the Company’s current liabilities by approximately
$1,700,000.  The conversion rate was $0.05 per share based on the
reported market price of the Company’s common stock on the date of conversion of
January 6, 2006.  At December 31, 2005, this transaction is reflected
in the Stockholders’ Equity section of the balance sheet as a stock issuance
obligation.
 
  27
 American
Water Star, Inc. and Its Subsidiaries
 Notes to
the Consolidated Financial Statements
 As of
December 31, 2007
  
 Options
and Warrants
 
 During
the first quarter of 2005, we issued warrants to purchase 1,500,000 shares of
common stock to Laurus Master Fund, Ltd.  The value of the warrants
using the Black-Scholes method was $107,000 that was recorded as additional
paid-in capital.
 
 A summary
of stock options and warrants is as follows:
   Options
                Weighted
      Average Price
                Warrants
                Weighted
      Average Exercise PriceOutstanding
      at December 31, 2006
                600,000
                $.77
                13,376,538
                $.48Granted
                ---
                ---
                ---
                ---Cancelled
                (600,000)
                $(.77)
                (13,376,538)
                $(.48)ExercisedOutstanding
      at December 31, 2007
                ---
                $---
                ---
                $---
 
   
 28
   
 
 EXHIBIT
31
 
 CERTIFICATION
 
 I, Roger
Mohlman, certify that:
 
 1.
              I
      have reviewed this annual report on Form 10-KSB of American Water Star,
      Inc.;
 
 2.
              Based
      on my knowledge, this annual report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      quarterly report;
 
 3.
              Based
      on my knowledge, the financial statements, and other financial information
      included in this quarterly report, fairly present in all material respects
      the financial condition, results of operations and cash flows of the
      registrant as of, and for, the periods presented in this quarterly
      report;
 
 4.
              I
      am responsible for establishing and maintaining disclosure controls and
      procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
      the registrant and have:
 
 (a)
              Designed
      such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure
      that material information relating to the small business issuer, including
      its consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;
 
 (b)
              Evaluated
      the effectiveness of the registrant’s disclosure controls and procedures
      and presented in this report our conclusions about the effectiveness of
      the disclosure controls and procedures, as of the end of the period
      covered by this report based on such evaluation;
  and
 
 (c)
              Disclosed
      in this report any change in the registrant’s internal control over
      financial reporting that occurred during the small business issuer's most
      recent fiscal quarter (the small business issuer's fourth fiscal quarter
      in the case of an annual report) that has materially affected, or is
      reasonably likely to materially affect, the small business issuer's
      internal control over financial reporting;
and
 
 5.
              I
      have disclosed, based on my most recent evaluation of internal control
      over financial reporting, to the small business issuer's auditors of the
      small business issuer's board of directors (or persons performing the
      equivalent functions):
 
 (a)                    All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the small business issuer's ability to record, process,
summarize and report financial information; and
 
 (b)                    Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the small business issuer's internal control over
financial reporting.
 
 
 Date:           April
10, 2008
 /s/ Roger
Mohlman
 Roger
Mohlman
 Chief
Executive Officer and Principal Accounting Officer
  29
  
 EXHIBIT
32
 
 CERTIFICATION
PURSUANT TO
 18
U.S.C. SECTION 1350,
 AS
ADOPTED PURSUANT TO
 SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
 
 In
connection with the Annual Report of American Water Star, Inc. (the “Company”)
on Form 10-KSB for the year ended December 31, 2007, as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Roger
Mohlman, Chief Executive Officer and Principal Accounting Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
 1.
              The
      Report fully complies with the requirements of Section 13(a) or 15(d) of
      the Securities Exchange Act of 1934;
and
 
 2.
              The
      information contained in the Report fairly presents, in all material
      respects, the financial condition and results of operations of the
      Company.
 
 
 Roger Mohlman, Chief Executive Officer
and
 Principal Accounting
Officer
 April 10,
2008