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EX-31 - Gold Hill Resources, Inc.gsae093009qexh311.htm
EX-32 - Gold Hill Resources, Inc.gsae093009qexh322.htm
EX-32 - Gold Hill Resources, Inc.gsae093009qexh321.htm
EX-31 - Gold Hill Resources, Inc.gsae093009qexh312.htm

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2009

or

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________________to_______________________________

Commission File Number:  000-53627

Green Star Alternative Energy, Inc.
(Exact name of Registrant as specified in its charter)

Nevada
(State or other jurisdiction of
incorporation or organization)

88-0441307
(I.R.S. Employer
Identification No.)

   

1660 Hotel Circle North, Suite 207, San Diego, CA 92108-2808
(Address of principal executive offices - Zip Code)

   

(619) 497-2555
(Registrant's telephone number, including area code)

   

___________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

   

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes  [X]     No  [ ]

   

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

Large accelerated filer

[ ]

 

 

Accelerated filer

[ ]

Non-accelerated filer

[ ]

(Do not check if a smaller reporting company)

 

Smaller reporting company

[X]

   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes  [ ]     No  [X]

   

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

   

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

 

Yes  [X]     No  [ ]

   

APPLICABLE ONLY TO CORPORATE ISSUERS:

   

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

On September 30, 2009, there were 26,250,000 shares of the issuer's common stock were outstanding.

 

 

Part 1.  Financial Information

Green Star Alternative Energy, Inc.
(Formerly R&R Travel, Inc.)
(A Development Stage Company)
Balance Sheets

 

 

As of
September 30,
2009

As of
December 31,
2008

ASSETS

(Unaudited)

(Audited)

 

Current Assets

Cash

$

22,784

$

3,310

Pre-paid accounting fees

$

1,680

$

-   

Other receivable

75,000

-   

Total Current Assets

$

99,464

$

3,310

 

Equipment, net

94,077

95,691

Total Assets

$

193,541

$

95,691

 

LIABILITIES & STOCKHOLDERS' EQUITY

 

Current Liabilities

Accrued Expenses

$

12,240

$

2,555

Accounts payable

22,172

2,775

Loan from related party

236,000

51,975

Other loan payable

94,063

94,063

Total Liabilities

364,475

151,368

 

Stockholders' Equity

Common Stock, (Authorized, 200,000,000 shares,
Par value: $0.001, 26,250,000 shares and 16,250,000 shares Issued and outstanding as of September 30, 2009 and December 31, 2008, respectively

26,250

26,250

Additional Paid-in Capital

33,750

33,750

Deficit accumulated during the development stage

(230,934)

(112,367)

Total Stockholders' Equity

(170,934)

(52,367)

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

193,541

$

99,001

 

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

2

 

Green Star Alternative Energy, Inc.
(Formerly R&R Travel, Inc.)
(A Development Stage Company)
Statements of Operations (Unaudited)

 

 


Three Months
Ending


Nine Months
Ending

From Inception
March 2, 2001
Through
September 30,
2009

September 30,
2009

September 30,
2008

September 30,
2009

September 30,
2008

REVENUES

     Revenues

$

-   

$

-   

$

-   

$

-   

$

68,029

Total Revenues

-   

-   

-   

-   

68,029

 

Operating Expense

     Administrative Expense

37,401

56,346

108,883

78,412

286,724

Total Operating Expenses

37,401

56,346

108,883

78,412

286,724

 

Other income (loss)

     Interest Expense

(3,660)

(209)

(9,684)

(209)

(12,239)

Total other income (loss)

(3,660)

(209)

(9,684)

(209)

(12,239)

 

Net (Loss)

$

(41,061)

$

(56,555)

$

(118,567)

$

(78,621)

$

(230,934)

 

Basic earnings per share

$

(0.00)

$

(0.00)

$

(0.00)

$

(0.00)

 

Weighted average number of common shares outstanding

26,250,000

22,351,695

26,250,000

21,505,474

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

3

 

Green Star Alternative Energy Inc.
(Formerly R&R Travel, Inc.)
(A Development Stage Company)
Statements of Changes in Stockholders' Equity (Unaudited)
From March 2, 2001 (inception) through September 31, 2009

 

 

Common
Stock

Common
Stock
Amount

Additional
Paid-in
Capital

Deficit
Accumulated
During the
Development
Stage

Total

On March 5, 2001,

6,250,000 shares issued for services

6,250,000

$

6,250

$

(5,000)

$

$

1,250

 

On April 5, 2001,

6,250,000 shares issued for services

6,250,000

6,250

(5,000)

1,250

 

August to December 2001

3,750 shares issued for cash

3750000

3,750

3,750

7,500

 

Net loss, December 31, 2001

(2,066)

(2,066)

 

Balance, December 31, 2001

16,250,000

16,250

(6,250)

(2,066)

7,934

 

Net loss, December 31, 2002

(2,204)

(2,204)

 

Balance, December 31, 2002

16,250,000

16,250

(6,250)

(4,270)

5,730

 

Net loss, December 31, 2003

(11,024)

(11,024)

 

Balance, December 31, 2003

16,250,000

16,250

(6,250)

(15,294)

(5,294)

 

Net loss, December 31, 2004

(1,475)

(1,475)

 

Balance, December 31, 2004

16,250,000

16,250

(6,250)

(16,769)

(6,769)

 

Net income, December 31, 2005

9,781

9,781

 

Balance, December 31, 2005

16,250,000

16,250

(6,250)

(6,988)

3,012

 

Net income, December 31, 2006

1,808

1,808

 

Balance, December 31, 2006

16,250,000

16,250

(6,250)

(5,180)

4,820

 

Net income, December 31, 2007

(4,820)

(4,820)

 

Balance, December 31, 2007

16,250,000

16,250

(6,250)

(10,000)

-   

 

May 9, 2008,

10,000,000 shares issued for cash

10,000,000

10,000

40,000

50,000

 

Net loss, December 31, 2008

(102,367)

(102,367)

 

Balance December 31, 2008

26,250,000

$

26,250

$

33,750

$

(112,367)

$

(52,367)

 

Net loss, September 30, 2009

(118,567)

(118,567)

 

Balance,
September 30, 2009 (unaudited)

26,250,000

$

26,250

$

33,750

$

(230,934)

$

(170,934)

* All outstanding share amounts have been retroactively restated to reflect the Company's 5 to 1 stock split.

 

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

4

 

GREEN STAR ALTERNATIVE ENERGY INC.
(formerly R&R TRAVEL, INC.)
(A DEVELOPMENT STAGE COMPANY)
Statements of Cash Flows (unaudited)

 

 

Nine Months
Ended

From Inception
March 2, 2001 to
September 30, 2009

September30,2009

September 30,2008

Operating Activities

Net income (Loss)

$

(118,567)

$

(78,621)

$

(225,458)

Adjustments to reconcile net income to net cash provided by operations:

Depreciation expenses

1,614

-   

1,760

Share issued for services

Changes in operating assets and liabilities:

Pre-paid accounting fees

(1,680)

-   

(1,680)

Increase (decrease) in accounts payable

19,397

10,260

22,172

Increase (decrease) in accrued expenses

9,685

209

12,238

Net Cash Provided (used) by Operating Activities

(89,551)

(68,152)

(190,968)

 

Investing activities

Purchase Equipment

-   

95,811

(95,811)

Net Cash Provided (used) by Investing Activities

-   

(95,811)

(95,811)

 

Financing Activities

Increase in loan from related party

109,025

20,000

161,000

Increase in other loan payable

-   

94,063

94,063

Cash received from issuance of stock

-   

50,000

60,000

Net Cash Provided (used) by Financing Activities

109,025

164,063

315,063

 

Increase (decrease) in cash from continuing operations

19,474

100

22,784

Cash and cash equivalents at beginning of period

3,310

-   

-   

Cash and Cash Equivalents at End of Period

$

22,784

$

100

$

22,784

 

Non-cash investing and financing activities:

Increase other receivable due to issue note

75,000

75,000

 

Supplemental cash flow disclosure:

Cash Paid for Interest

$

-   

$

-   

$

-   

Cash Paid for Income Taxes

$

-   

$

-   

$

-   

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

5

 

GREEN STAR ALTERNATIVE ENERGY INC.
(formerly R&R TRAVEL, INC.)
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements (Unaudited)
September 30, 2009

NOTE 1  ORGANIZATION AND DESCRIPTION OF BUSINESS

Green Star Alternative Energy, Inc. (the Company) (Formerly R&R Travel Inc.) was incorporated under the laws of the State of Nevada on March 2, 2001 and originally in the travel business, where the Company provided travel packages to financial services professionals in connection with seminars and other professional education events.

On June 6, 2008, the Company, by amendment to its articles of incorporation, changed its name to Green Star Alternative Energy, Inc. and changed its business operations to become a provider of clean restorative and profitable energy from wind, water and sunlight; whereas the world's current method of supplying the majority of its energy needs is with fossil fuels.

The Company has minimal operations at this time and is considered a development stage company.

 

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.  Basis of Presentation

The Company's financial statements are prepared using the accrual method of accounting and have been prepared in accordance with accounting principles generally accepted in the United State. The Company has elected a December 31, year-end.

b.  Basic and Diluted Earnings per Share

In February 1997, the FASB issued SFAS No. 128, "Earnings per Share", which specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock. SFAS No. 128 supersedes the provisions of APB No. 15, and requires the presentation of basic earnings (loss) per share and diluted earnings (loss) per share. The Company has adopted the provisions of SFAS No. 128 effective March 2, 2001 (inception).

Basic net loss per share amounts is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted earnings per share are the same as basic earnings per share due to the lack of dilutive items in the Company.

c.  Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

d.  Equipment

Equipment is carried at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the depreciable property (Wind Sensor: 20 year, Computer: 3 year). Management evaluates useful lives regularly in order to determine recoverability taking into consideration current technological conditions. Maintenance and repairs are charged to expense as incurred; additions and betterments are capitalized.

6

 

GREEN STAR ALTERNATIVE ENERGY INC.
(formerly R&R TRAVEL, INC.)
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements (Unaudited)
September 30, 2009

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fully depreciated assets are retained in equipment and accumulated depreciation accounts until retirement or disposal. Upon retirement or disposal of an asset, the cost and related accumulated depreciation are removed, and any resulting gain or loss, net of proceeds, is credited or charged to operations.

e.  Use of Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

f.  Income Taxes

Deferred income taxes are reported for timing differences between items of income and expense reported in the financial statements and those reported for income tax purposes in accordance with SFAS 109, "ACCOUNTING FOR INCOME TAXES," which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for tax loss and credit carry-forwards.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

g.  Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash deposits. This cash is on deposit with a large federally insured bank. The Company has not experienced any losses in cash balances and does not believe it is exposed to any significant credit risk on cash and cash equivalents.

h.  Recent Accounting Pronouncements

The Company does not expect any recent accounting pronouncements to have a material impact on its financial statements.

7

 

GREEN STAR ALTERNATIVE ENERGY INC.
(formerly R&R TRAVEL, INC.)
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements (Unaudited)
September 30, 2009

NOTE 3.  GOING CONCERN

The accompanying financial statements are presented on a going concern basis. The Company operated as R&R Travel from inception (March 2, 2001) until June 6, 2008 when the Company voted to change it's name to Greenstar Alternative Energy Inc. and modified it's business plan to operate as a provider of clean energy. The deficit accumulated during the development stage as of September 30, 2009 is $230,934. Available cash at September, 2009 is $22,784. The future of this Company is dependent upon its ability to obtain financing and upon profitable operations from the development of its business opportunities.

 

NOTE 4.  EQUIPMENT

Equipment consists of the following:

September 30, 2009

December 31, 2008

Wind Sensor

$  94,088

$  94,088

Computer

    1,749

    1,749

     Total Fixed Assets

   95,837

   95,837

     

Less: Accumulated Depreciation

   (1,760)

     (146)

     Net Fixed Assets

$  94,077

$  95,691

Depreciation expenses for the nine months ended September 30, 2009 and 2008 were $1,614 and zero, respectively.

 

NOTE 5  INCOME TAXES

The company has incurred operating losses of $230,934, which, if utilized, will begin to expire in 2021. Future tax benefits, which may arise as a result of these losses, have not been recognized in these financial statements and have been offset by a valuation allowance.

Details of deferred tax assets are as follows;

 

As of September 30, 2009

Deferred tax assets:

 

Net operating loss
(from inception to September 30, 2009)

$ 230,934

Statutory tax rate(combined federal and state)

34%

Deferred tax assets

78,518

Valuation allowance

(78,518)

Net deferred tax assets

-0-

8

 

GREEN STAR ALTERNATIVE ENERGY INC.
(formerly R&R TRAVEL, INC.)
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements (Unaudited)
September 30, 2009

NOTE 5  INCOME TAXES (Continued)

The potential future tax benefits of these losses have not been recognized in these financial statements due to the uncertainty of their utilization. When the future utilization of some portion of the carry-forwards is determined not to be "more likely than not" a valuation allowance is provided to reduce the recorded tax benefits from such assets.

 

NOTE 6  STOCKHOLDERS' EQUITY

On June 6, 2008, the Company voted, to amend its Articles of Incorporation to increase the total number of authorized shares of common stock at par value of $0.001 to 200,000,000 (two hundred million). Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock do not have cumulative voting rights and are entitled to share rateably in dividends, if any. In the event of a liquidation, dissolution or winding up the Company, the holders of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities.

All outstanding shares of common stock are fully paid and non-assessable. Holders of common stock have no pre emptive rights to purchase our common stock. There are no conversion or redemption rights or sinking fund provisions with respect to the common stock.

In March, 2001, the Company issued 6,250,000 shares of its common stock to various officers and consultants for services ($1,250) rendered to the Company.

In April, 2001, the Company issued 6,250,000 shares of its common stock to various officers and consultants for services ($1,250) rendered to the Company.

In the fourth quarter of 2001, the Company issued an offering of 3,750,000 shares of its common stock to various shareholders in exchange for cash proceeds realized in the amount of $7,500.

On May 9, 2008, the Company issued 10,000,000 shares of common stock at a price of $0.005 per share to its new CFO/Director for a total cash consideration of $50,000.

The stockholders' equity section of the Company contains the following class of capital stock as of September 30, 2009:

  • Common stock, $ 0.001 par value: 200,000,000 authorized 26,250,000 shares issued and outstanding

On June 6, 2008, the Company voted, via amendment to their Articles of Incorporation, to approve a forward share split of the Corporation's outstanding and issued shares of common stock of five (5) shares for each one (1) issued by the Corporation. All share amounts have been retroactively adjusted for all periods presented.

9

 

GREEN STAR ALTERNATIVE ENERGY INC.
(formerly R&R TRAVEL, INC.)
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements (Unaudited)
September 30, 2009

NOTE 7  LOANS PAYABLE

The Company issued a secured Promissory Note to Seal Commercial S.A. dated September 25, 2008 (the "Note") in connection with the purchase of Wind Sensors which act as "collateral" for the said loan. The loan is for $94,063 and the terms and conditions of such Note allow for prepayment of principle and accrued interest at anytime without penalty. The interest rate is 7% per annum and the maturity date is September 25, 2010. The total accrued interest as of September 30, 2009 is $6,675.

 

NOTE 8  LOANS FROM RELATED PARTY

The Company issued an unsecured Promissory Note dated August 30, 2008 (the "Note") to Jesse de Castro, a director of the Company, in connection with a $20,000 working capital loan to the Corporation. The terms and conditions of such Note allow for the prepayment of principle and accrued interest at anytime without penalty. The interest rate is 7% per annum and the maturity date is August 30, 2010. On December 15, 2008, the Company repaid $13,025. The total accrued interest as of September 30, 2009 is $801.

The Company issued an unsecured Promissory Note dated November 10, 2008 (the "Note") to Jesse de Castro, a director of the Company, in connection with a $15,000 working capital loan to the Corporation. The terms and conditions of such note allow for the prepayment of principle and accrued interest at anytime without penalty. The interest rate is 7% per annum and the maturity date is November 10, 2010. The total accrued interest as of September 30, 2009 is $933.

The Company issued an unsecured Promissory Note dated November 25, 2008 (the "Note") to Jesse de Castro, a director of the Company, in connection with a $30,000 working capital loan to the Corporation. The terms and conditions of such Note allow for the prepayment of principle and accrued interest at anytime without penalty. The interest rate is 7% per annum and the maturity date is November 25, 2010. The total accrued interest as of September 30, 2009 is $1,788.

The Company issued an unsecured Promissory Note dated February 12, 2009 (the "Note") to Jesse de Castro, a director of the Company, in connection with an $8,000 working capital loan to the Corporation. The terms and conditions of such Note allow for the prepayment of principle and accrued interest at anytime without penalty. The interest rate is 7% per annum and the maturity date is February 12, 2010. The total accrued interest as of September 30, 2009 is $353.

The Company issued an unsecured Promissory note dated February 17, 2009 (the "Note") to Jesse de Castro, a director of the Company, in connection with a $5,000 working capital loan to the Corporation. The terms and conditions of such Note allow for the prepayment of principle and accrued interest at anytime without penalty. The interest rate is 7% per annum and the maturity date is February 17, 2010. The total accrued interest as of September 30, 2009 is $214.

The Company issued an unsecured Promissory Note dated March 6, 2009 (the "Note") to Jesse de Castro, a director of the Company, in connection with a $25,000 working capital loan to the Corporation. The terms and conditions of such Note allow for the prepayment of principle and accrued interest at anytime without penalty. The interest rate is 7% per annum and the maturity date is March 6, 2010. The total accrued interest as of September 30, 2009 is $997.

10

 

GREEN STAR ALTERNATIVE ENERGY INC.
(formerly R&R TRAVEL, INC.)
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements (Unaudited)
September 30, 2009

NOTE 8  LOAN FROM RELATED PARTY (Continued)

The Company issued an unsecured Promissory Note dated May 15, 2009 (the "Note") to Jesse de Castro, a director of the Company, in connection with a $20,000 working capital loan to the Corporation. The terms and conditions of such Note allow for the prepayment of principle and accrued interest at anytime without penalty. The interest rate is 7% per annum and the maturity date is May 15, 2010. The total accrued interest as of September 30, 2009 is $413.

The Company issued an unsecured Promissory Note dated September 25, 2009 (the "Note") to Jesse de Castro, a director of the Company in connection with a $43,000 working capital loan to the Corporation. The terms and conditions of such Note allow for the prepayment of principle and accrued interest at anytime without penalty. The interest rate is 7% per annum and the maturity date is September 25, 2010. The total accrued interest as of September 30, 2009 is $49.

The Company issued an unsecured Promissory Note dated September 30, 2009 (the "Note") to Jesse de Castro, a director of the Company in connection with a $75,000 working capital loan to the Corporation. The terms and conditions of such Note allow for the prepayment of principle and accrued interest at anytime without penalty. The interest rate is 7% per annum and the maturity date is September 30, 2010. The total accrued interest as of September 30, 2009 is $14. The Company received this amounts on October 1, 2009. Therefore the Company recorded this amount as other receivable as of September 30. 2009.

In addition to the Notes, Jesse de Castro, a director of the company, advanced the company funds in the amount of $8,000 as of September 30, 2009. The balance is unsecured and interest free with no specified terms of repayment. These amounts are paid to Jesse de Castro on October 30, 2009.

 

NOTE 9  RELATED PARTY TRANSACTIONS

On September 1, 2009, the Board of Directors approved a salary increase to Jesse de Castro, a director of the Company, from $3,500 to $4,000 per month. This will be paid to De Castro Investments Inc. a corporation owned and managed by Mr. Jesse de Castro commencing September 1, 2009. This is to acknowledge the valuable contributions made by Mr. De Castro to the Company. As of September 30, 2009, there is unpaid salary amounting to $11,000 and total officer salary is $32,000 for nine months ended September 30, 2009.

On September 9, 2009 Mr. Jesse de Castro extended a short term interest -free loan of $5,000 to the Company to pay for professional fees.

On September 25, 2009 Mr. Jesse de Castro extended a short term interest-free loan of $3,000 to the Company to pay for professional fees.

11

 

MATTER OF FORWARD-LOOKING STATEMENTS

THIS FORM 10-Q CONTAINS "FORWARD-LOOKING STATEMENTS" THAT CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING WORDS SUCH AS "BELIEVES," "EXPECTS," "MAY," "WILL," "SHOULD," OR "ANTICIPATES," OR THE NEGATIVE OF THESE WORDS OR OTHER VARIATIONS OF THESE WORDS OR COMPARABLE WORDS, OR BY DISCUSSIONS OF PLANS OR STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES.  MANAGEMENT WISHES TO CAUTION THE READER THAT THESE FORWARD-LOOKING STATEMENTS, INCLUDING,  BUT NOT LIMITED TO, STATEMENTS REGARDING THE COMPANY'S MARKETING PLANS, GOALS, COMPETITIVE CONDITIONS, REGULATIONS THAT AFFECT PUBLIC COMPANIES THAT HAVE NO EXISTING BUSINESS AND OTHER MATTERS THAT ARE NOT HISTORICAL FACTS ARE ONLY PREDICTIONS.  NO ASSURANCES CAN BE GIVEN THAT SUCH PREDICTIONS WILL PROVE CORRECT OR THAT THE ANTICIPATED FUTURE RESULTS WILL BE ACHIEVED.  ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY EITHER BECAUSE ONE OR MORE PREDICTIONS PROVE TO BE ERRONEOUS OR AS A RESULT OF OTHER RISKS FACING THE COMPANY. FORWARD-LOOKING STATEMENTS SHOULD BE READ IN LIGHT OF THE CAUTIONARY STATEMENTS AND IMPORTANT FACTORS DESCRIBED IN THIS FORM 10-Q FOR GREEN STAR ALTERNATIVE ENERGY, INC., INCLUDING, BUT NOT LIMITED TO THE MATTERS SET FORTH IN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. THE RISKS INCLUDE, BUT ARE NOT LIMITED TO, THE RISK FACTORS AND UNCERTAINTIES SET FORTH IN ITEM 1A, "RISK FACTORS" AND THE RISKS ASSOCIATED WITH A SMALL COMPANY THAT HAS ONLY A LIMITED HISTORY OF OPERATIONS, THE COMPARATIVELY LIMITED FINANCIAL RESOURCES OF THE COMPANY, THE INTENSE COMPETITION THE COMPANY FACES FROM OTHER ESTABLISHED COMPETITORS, ANY ONE OR MORE OF THESE OR OTHER RISKS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE FUTURE RESULTS INDICATED, EXPRESSED, OR IMPLIED IN SUCH FORWARD-LOOKING STATEMENTS.  WE UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENT TO REFLECT EVENTS, CIRCUMSTANCES, OR NEW INFORMATION AFTER THE DATE OF THIS FORM 10-Q OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED OR OTHER SUBSEQUENT EVENTS.

12

 

As used herein, the term "the Company," "we,"  "us," and "our" refer to Green Star Alternative Energy, Inc., a Nevada corporation unless otherwise noted.

 

Item 2.  Plan of Operation.

Critical Accounting Policies and Estimates.

Our Plan of Operations section discusses our unaudited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.

These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the financial statements included in our Quarterly Report on Form 10-Q for the period ended September 30, 2009.

Corporate Background

Green Star Alternative Energy, Inc., a Nevada corporation (the "Company") was incorporated in the state of Nevada on March 2, 2001 under the name R & R Travel, Inc. At that time our management approved a conceptual business plan of providing a professional organization that offered travel and educational seminars and workshops for its clients. After the remarkable changes in the business climate that occurred on September 11, 2001, management suspended some of these efforts and waited to observe the effects on the travel industry.

Later and with the unsettling events that followed and the commencement of the Iraq War in March 2003, management changed our strategy but in 2003 and 2004 the Company continued to market our travel and educational seminars and workshops. At the time management reviewed the curriculum offerings and travel options relevant for more targeted market segments.

The change in our corporate strategy was the result of a re-evaluation of the opportunities that the Company had in the educational seminars and workshops industry and the belief that better opportunities could be found in the wind power industry. Our website is:  www.greenstarae.com.

Our Current Plan of Operation and Reassessment and New Business

In 2005 and 2006 we generated revenues from our seminars and workshops however in 2007, our management reassessed their business plans and in May 2008 we changed our corporate focus and elected new officers and directors with the result that we abandoned the business of offering travel and educational seminars and workshops.

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On July 3, 2008 and due to the efforts of our new management, our stockholders approved an amendment to our Articles of Incorporation so that, as amended, we changed our corporate name to Green Star Alternative Energy, Inc. and increased the authorized common stock to 200,000,000 shares via a five for one forward split of our Common Stock.

Our new management has been focusing on opportunities that may allow us to participate in clean, environmentally friendly energy generation projects. As a result and to the extent that our limited managerial and financial resources allow, we are focused on participating in one or more smaller wind energy generation projects via participation in joint ventures, partnerships, and other agreements either as a joint venture partner, general partner, or, if the project is not beyond our financial capacity and can be structured so as to allow us to participate as a co-owner, we may become a co-owner of a smaller, limited scale project.

In all of these pursuits, our strategy is to participate, on a selective basis consistent with our limited managerial and financial resources, in projects that may offer significant commercial opportunities in the clean, environmentally-friendly energy generation segment.

To that end, we have entered into a joint venture with Notos d.o.o., a limited liability company domiciled in the Republic of Serbia ("Notos") and with Sirius Regulus, d.o.o., a limited liability company also domiciled in the Republic of Serbia ("Sirius") (the "Serbian Joint Venture"). The Serbian Joint Venture is focused on generating electricity from wind-power at a wind farm located at the Belo Blato Wind Energy Project in the province of Vojvodina in the Republic of Serbia. To the extent that market conditions allow, we intend to raise the capital necessary to construct the Belo Blato wind farm and fulfill the financial requirements for the project, while Notos d.o.o. will provide the licensing, construction, and managerial expertise. The joint venture calls for Green Star to recoup all capital expenditures associated with the development before any profit sharing can take place.

Our review of the business and political environment of the Republic of Serbia has provided us with a strong incentive to implement this project.

Management Discussion and Analysis of Operations

First Nine Months Ending September 30, 2009 versus First Nine Months Ending September 30, 2008

During the first nine months ending September 30, 2009 (the "First Nine Months 2009"), we recorded $0 as Revenues. This compares to the first nine months ending September 30, 2008 (the "First Nine Months 2008") when we also recorded $0 as Revenues.

While we did not record any revenues during either of these periods and we have remained a "start-up" company throughout our corporate history, we did record $108,883 in Administrative Expense during the First Nine Months 2009 compared to $78,412 in Administrative Expense during the First Nine Months 2008. The increased Administrative Expense that we incurred during the First Nine Months 2009 resulted from the intense efforts that our management took in implementing our strategies and the plans we have made for our planned operations in the Republic of Serbia. These Administrative Costs included salary expenses, travel, telephone, office expense, meeting expenses, legal and accounting fees, filing fees with Pink Sheets, and similar related expenses.

We also incurred Interest Expense of $9,684 during the First Nine Months 2009 compared to $209 in the First Nine Months 2008. The increased Interest Expense represented the interest we incurred on $236,000 in loans we received including those received from Jesse M. De Castro, our Chief Financial Officer, Secretary, and Director and interest we incurred on $94,063 in loans we obtained in connection with our purchase of certain Wind Sensors. By comparison, we had no Interest Expense during the First Nine Months 2008.

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As a result, we recorded a Net Loss of $118,567 for the First Nine Months 2009 compared to a Net Loss of $78,621 during the First Nine Months 2008. This resulted in a Net Loss per share (basic) of ($0.00) during the First Nine Months 2009 compared to a Net Loss per share (basic) of ($0.00) for the First Nine Months 2008.

Three Months Ending September 30, 2009 versus Three Months Ending September 30, 2008

For the three months ending September 30, 2009 ("Third Quarter 2009"), we recorded $0 as Revenues which represents the same $0 amount recorded for Revenues for the three months ending September 30, 2008 ("Third Quarter 2008").

During the Third Quarter 2009, we recorded $37,401 in Administrative Expense compared to $56,346 in Administrative Expense during the Third Quarter 2008. The 33.62% decline in Administrative Expense reflected the intense efforts that we have been taking to control and monitor our operating expenses while also conserving our financial resources for our planned operations in the Republic of Serbia. These Administrative Costs included salary expenses, travel, telephone, office expense, meeting expenses, legal and accounting fees, filing fees with Pink Sheets, and similar related expenses.

We also incurred Interest Expense of $3,660 during the Third Quarter 2009 compared to $209 in the Third Quarter 2008. The increased Interest Expense represented the interest we incurred on an aggregate of $330,063 in loans we received (including $236,000 from Jesse M. De Castro, our Chief Financial Officer, Secretary, and Director and $94,063 in loans we obtained in connection with our purchase of certain Wind Sensors). By comparison, we had $209 Interest Expense during the Third Quarter 2008.

As a result, we recorded a Net Loss of $41,061 for the Third Quarter 2009 compared to a Net Loss of $56,555 during the Third Quarter 2008. This resulted in a Net Loss per share (basic) of ($0.00) during the Third Quarter 2009 compared to a Net Loss per share (basic) of $0.0 for the Third Quarter 2008.

Liquidity and Capital Resources

We have very limited liquidity and we have not received any commitment from any source of capital that will allow us to meet our capital requirements which are currently estimated at $7,200,000. On a going-forward basis, we anticipate that we may need $100,000 to $150,000 or more annually merely to maintain our corporate existence and pay the expenses and costs that we likely will incur to ensure that we can remain a corporate enterprise with all of our attendant responsibilities, filings, and associated documentation.

For these and other reasons, our management recognizes the adverse difficulties and continuing severe challenges we face. Apart from the limited funds that we have received from our Chief Financial Officer, Jesse M. De Castro, there can be no assurance that we will receive any financing or funding from any source or if any financing should be obtained, that existing shareholders will not incur substantial, immediate, and permanent dilution of their existing investment.

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Our operations and our securities are subject to a number of substantial risks, including those described below.  If any of these or other risks actually occur, our business, financial condition and operating results, as well as the trading price or value of its securities could be materially adversely affected.  No attempt has been made to rank these risks in the order of their likelihood or potential harm.  In addition to those general risks enumerated elsewhere in this Form 10-Q, any purchaser of our common stock should also consider the following risk factors:

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Risks Related to the Company's Operations

We have incurred continued operating losses and we lack a history of operations upon which an investor can assess our business and plans.

We incurred $118,567 in net losses during the nine months ending September 30, 2009 and $230,934 in cumulative net losses from inception to September 30, 2009. As a development-stage or "start-up" company we anticipate that we will likely incur significant additional losses in the future as well. We do not have any significant revenue-producing operations and we continue to incur costs and expenses for the Serbian Joint Venture, administrative costs, and other expenses. Further, because we are entering a new business, we lack a substantial operating history on which to base our anticipated expense and revenues. There is no assurance that we will be successful or that we will be profitable or achieve positive cash flow in the future.

All of our assets are and will likely be in Serbia; Serbia is not a member of the European Union and as a result the ability of any stockholder to enforce rights under Nevada Law, the law of our domicile, may be limited.

If we are successful in raising additional capital and in implementing our strategy, all of our assets and operations will be located in the Republic of Serbia and we will be subject to the laws, political environment, and other risks and uncertainties of the laws of Serbia. Serbia is not and likely will not be a member of the European Union in the near future. Further, if a stockholder were to seek to enforce rights accorded under the4 Nevada General Corporation Law (the laws of the state wherein we are domiciled), the stockholder may incur significant difficulties which may make any such efforts.

Conflict of Interests and Control of Notos, d.o.o. and Sirius Regulus, d.o.o.

Both Notos, d.o.o. ("Notos") and Sirius Regulus d.o.o. ("Sirius Regulus") are limited liability companies domiciled in and subject to the laws of the Republic of Serbia and, in each case, our President, Miodrag Andric is the Manager of both of these limited liability companies. As a result, Mr. Andric has a conflict of interest in that he has an interest in Notos, in Sirius Regulus, and an interest in the Company. While we believe that Mr. Andric has and will continue to resolve all conflicts in a satisfactory manner such that all transactions between the Company and Notos and between the Company and Sirius Regulus will be undertaken on terms that will be no different than those obtained from third parties in arms-length transactions, we cannot assure that we will always be successful in these efforts.

All of our Assets are concentrated in Serbia and we are subject to the political risks associated with an investment in Serbia.

Our assets are invested in our joint venture with Notos, d.o.o. and Sirius Regulus, d.o.o. both of which are limited liability companies domiciled in the Republic of Serbia. While we believe that this is prudent and appropriate in our current circumstances, in the event that we are not successful, we will likely incur substantial and protracted losses since we lacks diversification and an investor who purchases our Common Stock may have no real ability to gain the return of their investment.

Uncertainties & Lack of Revenues & Likelihood of Continued Uncertainty.

While we have expended substantial resources to implement our strategy to participate in the renewable "clean energy" industry through joint ventures, partnerships, and other arrangements, there can be no assurance that we will be successful in these efforts and generate any revenues or if we are successful, that we will generate and maintain revenues sufficient to sustain profitable operations with positive cash flow.

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Our current financial structure has resulted in a heavy dependence on debt financing and we have limited cash, limited working capital, and minimal equity.

We have, as of September 30, 2009, an aggregate of $364,475 in outstanding debt. We anticipate that we will, over the next twelve months, seek to raise at least $7,200,000 in additional capital for operating, marketing, and working capital needs, we can not assure you that we will be successful in these efforts or if we are, that we can raise any such funds on a reasonable and timely basis in light of our current circumstances.

Qualified Auditor's Opinion: Doubt as to Our Company as a Going Concern.

Our independent public accountants issued a qualified opinion on our financial statements for the year ended December 31, 2008 with respect to uncertainties concerning our ability to continue as a going concern.

Our Common Stock is Subordinate to Existing and Future Debt.

All of our Common Stock is and will remain subordinate to the claims of our existing and future creditors. As of September 30, 2009, we had $364,475 shown as Total Liabilities on our Balance Sheet. These existing claims together with likely additional debts, obligations, and other commitments that we give to others in the future, will be superior to any rights and interests of our stockholders.

We face risks normally associated with any conduct of business in foreign countries, including various levels of political and economic risk.

The occurrence of one or more of these events could have a material adverse impact on our current and future operations which, in turn, could have a material adverse impact on its future cash flows, earnings, results of operations and financial condition.  These risks include the following:

·          prevalence of various diseases where we conduct business;

·          security concerns;

·          adverse weather such as rainy season;

·          labor disputes;

·          uncertain or unpredictable political and economic environments;

·          war and civil disturbances;

·          changes in laws or policies;

·          policies that impact electricity generation and distribution

·          monetary policies;

·          unlinking of rates of exchange to world market prices;

·          environmental regulations;

·          labor relations;

·          return of capital;

·          taxation;

·          delays in obtaining or the inability to obtain necessary governmental permits;

·          governmental seizure of land and/or other assets

·          limitations on ownership;

·          institution of laws requiring repatriation of earnings;

·          increased financial costs;

·          import and export regulations; and

·          establishment of foreign exchange regulations.

·          government actions that reduce the price at which we may be able to sell electricity.

Any such changes may affect our planned operations and ability to generate electricity and sell it at a reasonable prices in the manner currently contemplated, as well as our ability to operate our planned electricity generating wind farm.  Certain changes could result in the confiscation of property by nationalization or expropriation without fair compensation.  We do not carry any insurance for any of these risks and we have no plans to acquire any such insurance in the future.

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Our planned operations will require permits and licenses from various governmental authorities.  If we are unable to obtain and maintain such requisite permits, licenses and approvals, our planned business operations and ability to become profitable may be adversely affected.

Such permits and licenses are subject to change in regulations and in various operating circumstances.  We cannot assure you that we will be able to obtain or maintain in force all necessary permits and licenses that may be required to conduct our planned operations or to maintain continued operations at economically justifiable costs.  In all such cases such approvals are, as a practical matter, subject to the discretion of the government or governmental officials of the Republic of Serbia.  No assurance can be given that we will be successful in obtaining any or all of such approvals.  Our inability to obtain and maintain the requisite permits, licenses and approvals could materially and adversely affect our operations and ability to become profitable.

Control of the Company is held by management.

Our present directors and officers hold the power to vote an aggregate of about 38% of our Common Shares as of September 30, 2009. As a result, any person who acquires our Common Shares will likely have little or no ability to influence or control the Company.

We face intense competition and we are likely to face continued competition in the future.

Currently, all of the electricity generated in the Republic of Serbia is generated by Elektroprivreda Srbije (or "EPS") which holds a monopoly on generation, distribution, and sale of electricity in Serbia. While we believe that the legal, political, and economic environment in Serbia has changed with the result that there are valuable opportunities for us and our partners in the Serbian Joint Venture, there can be no assurance that the extent of the change will not be far less than our current perceptions. As a result, we may encounter adverse legal, political, and economic barriers that could lead to significant and protracted losses with the result that any person who acquires our Common Stock could lose all or substantially all of their investment.

Due to a limited public market our Common Stock may not be easily sold.

There is a limited trading market for our Common Shares, and there is no guarantee that a continuous liquid trading market will subsequently develop. All of our Common Shares are traded only on the non-OTC Pink Sheets Market and there can be no assurance that the Common Shares will ever gain any liquid trading volumes in any other market or gain listing on any stock exchange. The U.S. Securities and Exchange Commission requires that any company whose securities are traded on the Bulletin Board Market file a Form 10 and become a "reporting company" and thereby become subject to the reporting requirements of Section 13 of the Securities Exchange Act of 1934. While we have filed this Form 10, there can be no assurance that we will, if we gain trading privileges on the Bulletin Board Market and that we will be successful in complying with the requirements to retain trading privileges for our Common Shares on the Bulletin Board.

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Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures:  We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  The term "disclosure controls and procedures", as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended ("Exchange Act"), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms.  Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of September 30, 2009, that our disclosure controls and procedures are effective to a reasonable assurance level of achieving such objectives.  However, it should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Management's Report on Internal Control Over Financial Reporting:  Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.  Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  The internal controls for the Company are provided by executive management's review and approval of all transactions.  Our internal control over financial reporting also includes those policies and procedures that:

    1. pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
    2. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management; and
    3. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company's internal control over financial reporting as of September 30, 2009.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework.  Management's assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of these controls.

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Based on this assessment, management has concluded that as of June 30, 2009, our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

This quarterly report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting.  Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.

Changes in Internal Control over Financial Reporting:  There were no changes in our internal control over financial reporting during the third quarter ending September 30, 2009, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

 

Item 1.  Legal Proceedings.

We are not a party to any pending legal proceedings, and no such proceedings are known to be threatened or contemplated.

 

Item 1A.  Risk Factors.

Our operations and our securities are subject to a number of substantial risks, including those described below.  If any of these or other risks actually occur, our business, financial condition and operating results, as well as the trading price or value of its securities could be materially adversely affected.  No attempt has been made to rank these risks in the order of their likelihood or potential harm.  In addition to those general risks enumerated elsewhere in the document, any purchaser of our common stock should also consider the following risk factors:

Lack of Diversification.

Our business, assets are concentrated in the Republic of Serbia and our planned operations will be concentrated there. As a result, we are not diversified and to that extent we face continuing challenges to achieve stable revenues, profits, and cash flow while also remaining exposed to the risks associated with this concentration.

Qualified Opinion Letter from Accountants.

Our accountants issued a qualified opinion letter in connection with their audit of our financial statements for the year ending December 31, 2008.  Their qualification, termed a "going concern" qualification arises primarily because of our limited equity, limited financial resources, and our existing debt obligations.

We are a small company with limited resources & we need additional capital.

We are a small company with limited financial resources relative to the many competitors in our industry.  In the event of any unexpected problems or difficulties in our business and planned operations, we may not have the ability to obtain sufficient additional capital on terms that are reasonable in light of our current circumstances and market conditions.  Further, we currently estimate that we will need to raise $7,200,000 in additional capital.  We have not received any assurances that this additional capital can be obtained or if it is obtained, that can be obtained on reasonable terms and in a timely fashion to allow us to execute our plans.

There is a limited trading market for our Common Stock.

Our common stock is presently traded in the Non-over-the-counter Pink Sheets.  Our stock trades on a limited and sporadic basis and we cannot assure you that a continuous liquid trading market will develop or, if it does develop, that it will be sustained for any continuous period.

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We are not profitable and we continue to have negative cash flow.

During the nine months ended September 30, 2009, we recorded a net loss of $118,567 compared to a net loss of $78,621 for the nine months ended September 30, 2008 and negative cash flow for the nine months ended September 30, 2009.  While we believe that if we can successfully implement our business plan and if market and competitive conditions allow, we may achieve profitability and positive cash flow, we can not assure you that we will achieve profitability and positive cash flow or if we do achieve these goals, that we can sustain profitability and positive cash flow in the future.

We have not paid any cash dividends on our Common Stock and we have no plans to do so.

Our board of directors determines whether to pay cash dividends on the Company's issued and outstanding shares. The declaration of cash dividends will depend upon our future earnings (if any), our capital requirements, our financial condition and other relevant factors.  Our board of directors does not intend to declare any cash dividends on our Common Stock for the foreseeable future.  We anticipate that we will retain any earnings to finance the growth of our business and for general corporate purposes.

We face intense competition.

If we are successful in raising additional capital on a timely basis, we will face considerable competition from other electricity producers. Companies with greater financial resources, larger staffs, more experience and more equipment will be better positioned to compete with us.  In addition, all of our assets and operations will be concentrated in the electricity generating business described in this Form 10-Q and we have no current plans to diversify into any other business activity.

There is only limited trading and a limited history for our Common Stock.

Our common stock trades on a limited and sporadic basis and, as a result, there is only limited liquidity in our common stock.  Further, our common stock has had only a limited trading history on the non-OTC Pink Sheets.  As a result and given the limited trading market for our common stock, the price of our common stock may be far more volatile and unpredictable than the prices of common stocks and other securities that have a long and established trading history.

The market price of our Common Stock is likely to be adversely impacted by Rule 144 Stock Sales.

Many of the shares of our outstanding Common Stock are "restricted securities" and may be sold only in compliance with Rule 144 adopted under the Securities Act of 1933 or other applicable exemptions from registration.  As revised effective February 15, 2008, Rule 144 generally now requires that a holder of our restricted Common Stock hold these "restricted securities" for at least six months from the date at which they were acquired before undertaking any public re-sale of the restricted Common Stock pursuant to Rule 144.  And if the holder is an "affiliate" (as defined in Rule 144(a)(1) or was an "affiliate" in the immediately preceding 90 day period), then the holder must also satisfy certain other requirements of Rule 144.  As a result of the revision to Rule 144 that became effective February 15, 2008 (including but not limited to the shorter holding period under Rule 144(d)), potential and actual sales of our Common Stock by our present shareholders may have a depressive effect on the price of our Common Stock in the marketplace.

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We face continuing government, environmental, and legal risks.

Our planned operations are subject to Republic of Serbia and local laws and regulations regarding environmental matters and the generation and distribution of electricity. Any changes in these laws could affect our operations and economics.  Environmental laws and regulations change frequently, and the implementation of new, or the modification of existing, laws or regulations could harm us.  While we believe we do not currently have any material environmental obligations, our planned activities may give rise in the future to significant liabilities on our part to the government and third parties and may require us to incur substantial costs of remediation.

We face operational hazards and responsibilities.  Our planned operational activities are subject to a number of risks and hazards which include but not limited to the following:

·          environmental hazards;

·          industrial accidents;

·          labor disputes;

·          unusual or unexpected weather or operating conditions;

·          changes in regulatory environment;

·          natural phenomena such as severe floods, earthquakes; and

·          other hazards.

These occurrences could result in significant damage to, or destruction of, our planned electrical generating ability or production equipment, personal injury or death, environmental damage, delays in operations, monetary losses and possible legal liability.  The occurrence of these operational hazards could adversely affect our planned operations by limiting production or require that we cease our planned operations.

Cease Trade Order by British Columbia Securities Commission

In June 2009 we were summarily informed that the British Columbia Securities Commission ("BCSC") imposed a cease trade order ("CTO") on our Company. While we were given no notice that any such CTO was being considered by the BCSC and we were not given any hearing or an opportunity to present our position, we are aware that we have not paid the $1,600 in fees sought by the BCSC and we have not received any further documents from the BCSC which would support the BCSC claim imposing the CTO and why or how the BCSC can assert any jurisdiction over us. As a result, we cannot assure you that the BCSC will not attempt to take further action against us or otherwise attempt to disrupt or trading market, or our company and our business.

We have no existing insurance coverage.

We are not insured against any losses or liabilities that could arise from its operations either because insurance is unavailable or because the premium cost is excessive.  The payment of such liabilities could have a material adverse effect on our financial position and, depending on the extent of such liability, could result in the total loss of its assets and operations.  If we are successful and commence the operation of the planned wind farm that allows us to generate electricity, it involves hazards, which could result in us incurring substantial losses and liabilities to third parties for pollution, accidents and other hazards.  We have no public liability insurance; thus if we incur uninsured losses or liabilities, the funds available for the implementation of our business plan will be reduced and our assets may be jeopardized.  The payment of such liabilities may have a material adverse effect on our financial position and, depending on the extent of such liability, could result in the total loss of its assets and operations.

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If we are successful, all of our anticipated revenues will be generated in the form of Serbian Dinars.

If we are successful in implementing our business plan and in raising the $7,200,000 in additional capital and commence operations, our sales revenues will be in the form of Serbian Dinars. If applicable currency exchange rates fluctuate, our revenues and results of operations may be materially and adversely affected. We will also likely incur a significant amount of our expenses payable in Serbian Dinars.  As a result, our financial performance is affected by fluctuations in the value of the Serbian Dinar to the U.S. Dollar.  At the present time, we have no plan or policy to utilize forward contracts or currency options to minimize this exposure, and even if these measures are implemented there can be no assurance that such arrangements will be available, be cost effective or be able to fully offset such future currency risks.

We are likely to remain dependent upon key executives.

Our success depends to a great extent upon the continued successful performance of key executives and employees in general and specifically Mr. Miodrag Andric and Mr. Jesse M. De Castro.  Mr. Andric is presently employed by us as our President and Chief Executive Officer and Mr. De Castro is our Secretary, Treasurer, and Director.  Mr. Andric and Mr. De Castro also serve as two of our directors.  If Mr. Andric or Mr. De Castro were unable to perform their duties for any reason, our ability to implement our plans will be materially adversely effected.  We do not have a key man life insurance policy on the life of Mr. Andric or Mr. De Castro and we have no plans to acquire any key man life insurance in the future.

Stockholders face difficulties in enforcing civil liabilities against us.

Substantially all our assets are located outside of the United States and certain of our directors and officers are resident outside of the United States.  As a result, it may be difficult or impossible to enforce judgments granted by a court in the United States against our assets or our directors and officers residing outside of the United States.

We face continuing challenges in ensuring the efficacy of our internal controls.

Effective internal controls are necessary for us to provide reliable financials reports and effectively prevent fraud.  If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed.  We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement.  Any failure to implement required new or improved controls, or difficulties encountered in their implementation, or lack of resources to properly implement internal controls, could harm our operating results or cause us to fail to meet our reporting obligations.  Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

We face continuing challenges in meeting the requirements under Sarbanes Oxley.

The Sarbanes-Oxley Act of 2002 was enacted in the United States in response to public concerns regarding corporate accountability in connection with recent accounting scandals.  The stated goals of the Sarbanes-Oxley Act are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies, and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws.

The Sarbanes-Oxley Act generally applies to all companies that file or are required to file periodic reports with the SEC, under the Securities Exchange Act of 1934.  As a public company, we are required to comply with the Sarbanes-Oxley Act.  The enactment of the Sarbanes-Oxley Act of 2002 has resulted in a series of rules and regulations by the SEC that increase responsibilities and liabilities of directors and executive officers.

The perceived increased personal risk associated with these recent changes may deter qualified individuals from accepting these roles.  As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.  Sarbanes Oxley 404 compliance is a costly and time-consuming process and there can be no assurance that we will continue to be compliant.

We have limited internal and external resources to devote to maintaining SOX 404 compliance and there can be no assurance that we can maintain compliance.  We continue to evaluate and monitor developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

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Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

(1)

On September 25, 2009, we issued an unsecured promissory note. In this connection:

       
 

(a)

The unsecured promissory note was sold to Jesse M. De Castro, our Chief Financial Officer, Secretary, and Director in the amount of $43,000. The Note bears interest at 7.00% (simple interest) and matures on September 25, 2010.

       
 

(b)

We received the sum of $43,000 in cash from the sale of the unsecured promissory note.

       
 

(c)

We relied upon the exemption provided by Section 4(2) of the Securities Act of 1933 in that:

       
   

(i)

Mr. De Castro is sophisticated and experienced in investment and securities matters and can fend for himself;

       
   

(ii)

Mr. De Castro had, prior to the issuance of the promissory note, access to all of the Company's books and records prior to making the investment;

       
   

(iii)

The Company made available all of its officers and directors to give Mr. De Castro an opportunity to ask questions and receive answers to all said questions;

       
   

(iv)

Mr. De Castro received, prior to the issuance of the promissory note, accurate and complete disclosures regarding the Company and its affairs equivalent to that found in a registration statement;

       
   

(v)

Mr. De Castro had an pre-existing relationship with the Company and the issuance of the promissory note was not the result of any advertising or general solicitation; and

       
   

(vi)

Mr. De Castro agreed that he was acquiring the promissory note for investment purposes only and not with a view to any distribution.

       
 

(d)

All of the $43,000 in proceeds was used to increase the Company's working capital.

       
 

(e)

We did not incur and we did not pay and will not be paying any fees or commissions to any third parties in connection with the issuance of the unsecured promissory note.

       
 

(f)

No underwriter or broker-dealer was retained or employed in connection with the issuance of the unsecured promissory note.

       
 

(g)

The unsecured promissory note was issued with a restricted securities legend consistent with the requirements of the Securities Act of 1933.

       

(2)

Similarly, on September 30, 2009, we issued an unsecured promissory note. In this connection:

       
 

(a)

The unsecured promissory note was issued to Jesse M. De Castro, our Chief Financial Officer, Secretary, and Director in the amount of $75,000. The Note bears interest at 7.00% (simple interest) and matures on September 30, 2010.

       
 

(b)

We received the sum of $75,000 in cash from the sale of the unsecured promissory note.

       
 

(c)

We relied upon the exemption provided by Section 4(2) of the Securities Act of 1933 in that:

       
   

(i)

Mr. De Castro is sophisticated and experienced in investment and securities matters and can fend for himself;

       
   

(ii)

Mr. De Castro had, prior to the issuance of the promissory note, access to all of the Company's books and records prior to making the investment;

       
   

(iii)

The Company made available all of its officers and directors to give Mr. De Castro an opportunity to ask questions and receive answers to all said questions;

       
   

(iv)

Mr. De Castro received, prior to the issuance of the promissory note, accurate and complete disclosures regarding the Company and its affairs equivalent to that found in a registration statement;

       
   

(v)

Mr. De Castro had an pre-existing relationship with the Company and the issuance of the promissory note was not the result of any advertising or general solicitation; and

       
   

(vi)

Mr. De Castro agreed that he was acquiring the promissory note for investment purposes only and not with a view to any distribution.

       
 

(d)

All of the $75,000 in proceeds was used to increase the Company's working capital.

       
 

(e)

We did not incur and we did not pay and will not be paying any fees or commissions to any third parties in connection with the issuance of the unsecured promissory note.

       
 

(f)

No underwriter or broker-dealer was retained or employed in connection with the issuance of the unsecured promissory note.

       
 

(g)

The unsecured promissory note was issued with a restricted securities legend consistent with the requirements of the Securities Act of 1933.

25

 

Item 3.  Defaults Upon Senior Securities.

None

 

Item 4.  Submission of Matters to a Vote of Security Holders.

None.

 

Item 5.  Other Information.

None. 

 

Item 6.  Exhibits.

Number

Exhibit

   

31.1

Rule 13a-14(a) Certification of Chief Executive Officer

31.2

Rule 13a-14(a) Certification of Chief Financial Officer

32.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer

32.2

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer

26

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

GREEN STAR ALTERNATIVE ENERGY, INC.

 

Date:  November 10, 2009

BY:  /s/ Miodrag Andric
MIODRAG ANDRIC
Chief Executive Officer

   

Date:  November 10, 2009

BY:  /s/ Jesse M. De Castro
JESSE M. DE CASTRO
Chief Financial Officer

 

27